Can You Have More Than One Life Insurance Policy?

Lynda Taylor is an assistant director of Insurance Solutions Development at Northwestern Mutual.

You typically have only one insurance policy for your car or your home, but is that also true for life insurance? Can you have multiple life insurance policies? Well, the short answer is yes. In fact, it’s fairly common for people to have more than one life insurance policy. We’ll tell you why it might be helpful and how it might work.

How many life insurance policies can you have?

There’s technically no limit on the number of life insurance policies you can have. As life changes, it may make sense to have additional policies. They can vary in the amount of death benefit, the duration of the coverage, who pays for it and the type of policy.

How buying multiple life insurance policies works

There are many ways to end up with more than one life insurance policy. For example, you might have a life insurance policy through work and decide to purchase a term life insurance policy when you get married to provide financial security for your spouse. Or, you might have a whole life insurance policy from when you were a child, but now that you’ve decided to grow your family, you decide to take out a new, larger whole life policy.

You might even end up with a few term life insurance policies. These might cover different lengths of time. For example, you may get one policy when you buy a house and then add more coverage through another policy when you have kids.

Alternatives to consider

You may be able to increase the amount of coverage through a policy you already have. For example, an Additional Purchase Benefit (APB) guarantees you the right to purchase additional life insurance during certain time frames or when you experience major life events (such as marriage, adoption or the birth of a child). A nice part about this process is that it won’t involve another review of your health status. The details will depend on your policy and provider.

APB is an example of a small add-on, or insurance “rider.” Another way to leverage your existing policy might be to purchase small additional policies that are paid for upfront.

Common reasons to have more than one life insurance policy

Life insurance plays a critical role in financial planning that can change over time, and there are multiple ways to structure a policy. This leads many people to use multiple policies for different reasons. You may earn a promotion and pay raise at work, prompting you to get additional insurance to cover that possible income loss in the future. Or you might have or adopt children, so you want to get more coverage for yourself to help provide for the family when you pass away. And you might want to increase coverage on a spouse or partner as well.

Here are some of the most common reasons people get multiple life insurance policies.

To add coverage beyond your existing work life insurance

In many cases, it makes sense to pair the life insurance offered through work with a policy you buy on your own. If you’re offered insurance through work, it can be a great benefit. It’s often paid by your company, or the cost is relatively inexpensive. In addition, you typically don’t need any kind of health screening to get coverage, as you might with insurance you buy on your own.

But insurance through work isn’t enough coverage for most people. For example, you might get $50,000 or two times your salary—and that might not be enough death benefit to cover expenses when you’re no longer here.

Additionally, your employer usually gives you term life insurance, which means it offers only a death benefit. If you leave your job, you’ll probably lose the life insurance provided by your employer. Depending on your health, you may not be able to purchase insurance on your own. So people in good health often plan ahead and buy private life insurance in addition to their workplace policy, so they always have some coverage even if they get a different job or their health worsens.

You have multiple different needs that can’t be met by just one type of policy

Even when you buy private life insurance, it’s common to have multiple policies for different reasons. You might be striving to cover your mortgage payment, save for your kids to attend college or leave a legacy to loved ones or charity.

With term insurance, you can get the same death benefit as a permanent policy but at a lower cost. However, while the primary purpose of a permanent policy is the death benefit, it will also accumulate cash value that grows in a tax-advantaged way and is accessible throughout your life.* In addition, permanent life insurance never expires (a term policy does). So, as long as you pay the premiums to keep the policy going, it will pay a death benefit someday.

It’s common to use a mix of term and permanent life insurance to balance the lower costs of term while still getting the additional, long-term benefits of a permanent life insurance policy.

Your coverage needs grow over time

When you’re young and starting a family, you may have a large death benefit need—and a tight budget. That makes term life insurance a good fit. But over time, as your income rises and your family grows, you may find it makes sense to add permanent insurance. In many cases, people convert some of their term insurance to get the added benefits of permanent insurance. This can result in multiple life insurance policies.

You own a business

If you’re a business owner, the thinking is similar. As your business grows, you may find you have additional needs for life insurance to protect your growing enterprise. For example, you might need to cover a buy-sell agreement or cover key employees with key person insurance.

Insurability limits and other concerns about “too much” insurance

While you can get multiple life insurance policies from different companies, there’s something called an “insurability limit.” This maximum of life insurance depends on things like your age and income, so it varies from person to person. And companies have different formulas for the total amount of insurance they’ll provide.

Most people applying for life insurance don’t hit the company’s limit. So don’t worry about this too much unless you are applying for an unusually high amount of life insurance or are trying to get additional insurance when you’re already very well insured.

Some people wonder if it’s illegal to have “too much” life insurance. As long as you’re honest on your application about how much insurance you have and your health status, you’re legally allowed to buy more insurance if a company offers it to you.

When to consider additional life insurance

Often, life milestones may prompt you to reassess or increase your need for life insurance. These could include getting married, having kids, buying a home, supporting aging parents or insuring a family.

Your Northwestern Mutual financial advisor can help you review your financial needs and recommend the best strategy for adding life insurance to your financial plan. They can work with you throughout your life to update your insurance and investments. Your advisor can suggest opportunities and point out blind spots in your overall financial plan.

* Utilizing the cash value through policy loans, surrenders or cash withdrawals will reduce the death benefit and may necessitate greater outlay than anticipated and/or result in an unexpected taxable event.