How many life insurance policies can I have?

With so many financial responsibilities in today's world, we're commonly asked whether or not it's legal to take out more than one life insurance policy.

The answer is, yes.

Unlike other insurance policies, such as car or home, or a mortgage, it's possible to secure multiple life insurance policies simultaneously.

In fact, layering life insurance allows you to have multiple policies to cover different financial responsibilities. For example, children, spouse, mortgage, living costs, inheritance and funeral costs.

When taking out multiple policies your current situation will be taken into account by the insurer to determine whether or not you require that level of cover.

You'll not be approved to take out more life insurance cover than is deemed required for your personal circumstances.

Now we know you can have simultaneous policies, let’s look at all the other important information with regards to this setup.

How much life insurance do you need?

Enter your financial commitments to understand the level of cover you require.

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£121,687 is the estimated average outstanding mortgage per household in the UK.

Our property is generally the largest financial commitment any of us will make.

Your life insurance should cover this significant debt should you no longer be around.
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According to Money Advice Service, full-time childcare in the UK now costs £242 a week.

The loss of a parent could result in the need for additional childcare whilst the surviving parent increases their hours to account for lost income.

Your life insurance cover should factor in this additional required outgoing.
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The average level of debt (minus a mortgage) in the UK is £15,385.

Factoring in any outstanding debts in your name when arranging life insurance ensures this burden is not passed to loved ones.
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You may wish to leave your loved ones an inheritance or lump sum gift upon your passing.

Factoring in the gift amount when arranging your cover will ensure the pay out amount will be sufficient to provide your loved ones with this selfless gesture.
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According to SunLife, the average cost of a UK funeral is now £4,417, whilst the total cost of dying is £9,493.

This is a 130% increase over the past 16 years and shows no signs of slowing down.

A significant cost which should be factored into the amount of life insurance you secure.
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If you are one of the 65% of the UK who are lucky enough to have savings, this could be used as protection if you were to pass away.

Any pay outs from existing life insurance policies and investments can also be used as financial protection for your loved ones if you were no longer around.

Factor this into your required cover amount.
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Your total cover estimate

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Can you have more than one life insurance policy?

Types of life insurance policies

Different types of life insurance are more suitable for covering certain aspects within your life than others.

For example:

  • Decreasing term life insurance - well suited to cover a repayment mortgage. The pay out sum reduces over time to mirror your declining mortgage balance
  • Over 50s plans - good for those aged 50-85 who may have suffered medically and who are looking to cover the cost of their funeral and/or leave an inheritance
  • Level term life insurance - often used by parents to cover financially dependent children and their lifestyle until they become independent
  • Whole of life insurance - often taken out by those in later life who are in good health and who want a guaranteed pay out
  • Family income benefit (or FIB) - mimics a salary and provides a tax-free monthly income as opposed to a one-off lump sum

If you're looking to cover different aspects of your life, for example, a mortgage and day-to-day living costs, it's likely you would benefit from having multiple policies. (Subject to your available budget).

In the above example, it could be beneficial to have a decreasing term policy to cover the value of your mortgage, as well as, family income benefit to provide ongoing monthly payments to meet your family’s living expenses if you were no longer around.

It's a good idea to consider exactly what it is you're looking to protect before securing the most suitable policies to meet these demands.

Can you claim on more than one life insurance policy?

Yes. Just as it's possible to have multiple policies in place, it's also possible for your beneficiaries to claim multiple pay outs after you're gone.

If you have multiple life insurance policies, your beneficiaries can receive a pay out from each individual policy leading to a much larger overall sum.

They'll need to claim on each policy individually though and provide the necessary details of each of the policies you have in place.

Provided all the information supplied during the application process is deemed fully disclosed, then each policy will be valid and separate pay outs issued.

However, if any information is deemed to have been falsified on a particular policy, then it will be deemed invalid. Although, this should not affect the other policies you have in place.

Cover protection through your employer

Some employers offer cover protection to employees through their job. Policies like group life insurance (or death in service) are often offered as an employee benefit.

When calculating how much life insurance you need and how many policies you require you should consider the value of this coverage, (if you have it).

It's important to remember that this cover cannot be moved between companies. So, if you enjoy this benefit in your current role but change employer the policy will not transfer with you.

Therefore, if you enjoy cover through your work, in many circumstances it still makes sense to have your own personal life insurance too.

Increasing your existing life insurance cover

In certain circumstances increasing your life insurance cover may be more beneficial than taking out an additional policy.

Certain significant life events can be used to invoke a special events option on your existing policy. This includes having more children and moving to a larger property.

When a special events option is invoked, it means that the amount of cover you have in place can be increased without the need for additional underwriting.

This option would be more beneficial than taking out an additional life insurance policy if:

  • You've significantly aged since the start of your existing policy
  • You've suffered a medical condition since the start of your policy
  • Your smoking habits, drug use or alcohol consumption have increased since the start of your policy

Whilst invoking the special events clause will cause your premiums to increase to cater for the greater level of cover, it's likely to be less significant than the cost of loaded premiums caused by the above circumstances.

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Do multiple policies need to be purchased at the same time?

No. It's not essential for policies to be purchased at the same time, but there's the possibility of a discount if they are.

It's likely your need for each policy type will develop at a different time in your life. Therefore, it wouldn't make sense to pay for levels of cover which aren't currently necessary.

For example, you may take out decreasing term cover when you purchase your first property to protect your largest single financial investment.

Two years later, if you were to have a child, whilst you could invoke the special events option, to avoid the pay out provided to your child from decreasing over time, it may be more suitable to take out a level term policy.

However, if you were about to buy your first house and already had a child, it may be worth looking at taking out level term and decreasing term life insurance simultaneously as some insurers offer discounts when multiple policies are purchased.

What happens if you have more than one life insurance policy?

Having more than one life insurance policy in place doesn't affect the terms of cover for each policy.

Each policy exists in its own right.

You'll make monthly payments on each policy and, if term-based, each policy will expire at its own rate.

The sum assured, if set to reduce over time, will also change at the rate attached to that particular policy and won't be affected by any other policies you have in place.

If you were to pass away, all valid policies can be claimed for by your dependants simultaneously.

Although, if held with different providers, multiple claims may need to be filed.

Multiple policies as a business owner

As a business owner, it's important to have enough life insurance in place to cover both the personal and business aspects of your life.

For your personal life, the previously discussed aspects should be considered. For example, what it is you're looking to cover and the type of cover most appropriate.

With regards to covering the business aspects of your life, there are various options available.

A joint life insurance policy could be taken out between business partners to ensure that if either party were to pass away, the business could still function.

Alternatively, where a board is concerned, there's a more specific life insurance option called key man insurance which, unfortunately, isn't offered by Reassured.

Pairing life insurance with a funeral plan

Taking out life insurance and a funeral plan simultaneously can ensure all costs associated with your funeral are covered, whilst also providing your loved ones with extra financial security.

Commonly, people take out a funeral plan when they're either too old or too ill to be accepted for traditional life insurance.

But life insurance and funeral plans actually provide different benefits, suggesting it may be more beneficial to have both in place rather than opting for one or the other.

Funeral plans allow you to secure your funeral at today’s prices.

This can be extremely beneficial given the fact that the average cost of a funeral has risen 130% over the past 16 years[1].

This increase shows no signs of slowing down either and it's expected that the cost of the average funeral will continue to rise.

In contrast, life insurance provides your loved ones with a lump sum pay out.

Whilst this lump sum may seem significant at the time of application, once increased living costs and inflation are factored in, it's real terms value could be much less.

One important factor to consider is that most funeral plans only cover the cost of the funeral director.

Some plans provide a contribution to third-party costs but when you consider the average cost of a burial plot is currently £1,200[2], this contribution is unlikely to stretch far. This would leave your loved ones to cover the remainder of the bill.

Therefore, having in place both life insurance and a funeral plan will cover the funeral director costs, whilst locking in today's prices and provide a lump sum large enough to cover all required third-party fees.

Cost of funerals infographic UK

Is it good to have multiple life insurance policies?

As discussed, it can be beneficial to have multiple layers of life insurance to ensure all aspects of your life are adequately protected.

Whether or not adopting an all-encompassing solution or multi policies will depend on your individual circumstances and budget.

Having multiple policies in place will require numerous premium payments, which requires additional budgeting.

It can also be possible to secure the overall sum assured from all policies in one all-encompassing policy for less than the total of multiple premiums.

As a result, it's always best to discuss your cover requirements and obtain quotes to determine the best, most cost-effective solution.

The benefits of using a life insurance broker

Whether you decide to take out multiple policies from the get-go or when is necessary, using a broker allows you to compare multiple policies.

Don't assume all insurers offer similarly priced quotes. In fact, due to the different underwriting processes employed, prices can vary significantly.

At Reassured, our goal is to help you secure the right policy, for the best price. Let us help you save both time and money.

We can also support you through the lengthy application process, unpicking any insurance-jargon you don't understand.

Even if you already have cover in place but didn’t carry out price comparisons, it may benefit you to cancel your existing policy and take out a new one. Again, we can help you compare quotes.

And the best bit - our award-winning brokerage service is completely free to use.

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Sources:

[1] SunLife (2020), Cost of Dying Report, sunlife.co.uk/costofdying2020

[2] https://www.moneyadviceservice.org.uk/en/articles/how-much-does-a-funeral-cost

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