Can you have more than one life insurance policy? - Which? (2024)

Why would you get more than one life insurance policy?

There are many reasons why you might need more than one life insurance policy in place at the same time.

For example, if you have a repayment mortgage you might want a decreasing term life insurance policy where the payout falls with your outstanding mortgage payment.

You might also want to ensure your surviving partner or your family has either a lump sum or a replacement income (family benefit policy) in the event of you dying.

And your circ*mstances might change partway through a life insurance term, meaning you require additional life insurance or a replacement policy.

It is perfectly legal to have more than one life insurance policy and many people choose to take out different policies depending on their needs.

Here we explain how different life insurance policies can fit together, and how to avoid becoming over-insured.

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Can you have more than one life insurance policy? - Which? (1)

Multiple life insurance policies explained

It is perfectly legal and fairly common for people to have more than one life insurance policy in place at the same time.

You might have more than one policy as an individual or have joint life insurance with a partner.

You can have a joint life insurance policy and a single life insurance policy at the same time.

The only caveat is that you must tell each life insurer about any other policies you have or are applying for.

This helps prevent people becoming suspiciously over insured.

If you earn an average salary and take out five life insurance policies that would pay out a total of £1m, alarm bells will ring. You are not supposed to be 'better off dead'.

  • Find out more:What is whole-of-life insurance?

Benefits of having more than one life insurance policy

There are many circ*mstances when having more than one life insurance policy can bring benefits.

The earlier in your life that you take out life insurance, the cheaper it will be. So if you need to increase your sum insured later, you might be better off taking a second policy out, rather than cancelling and buying a completely new policy.

For example, if you take out a 25-year decreasing term policy to match your 25-year mortgage and then, 10 years later, borrow some extra to build an extension.

You might leave your existing policy in place and buy a 15-year decreasing term policy to match the additional borrowing.

That 15-year policy might be more expensive than your original policy because you are older or have developed a medical condition that increases the risk of you dying early. Premiums are based on your age, the medical information you and your doctor provide, plus your lifestyle.

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Multiple policies for families

Families often have more than one policy in place serving different purposes - for instance paying off a mortgage and providing income to live on.

You may need additional life insurance if your family grows or your circ*mstances change.

For some people that will mean cancelling an existing policy and buying a new one, but for many it could be better to buy additional life insurance. If you are replacing an old policy, never cancel it until the new policy is in place.

  • Find out more:What is over 50s life insurance?

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Do you need more than one life insurance policy?

Be careful not to take out more life insurance than you actually need.

Make sure any new life insurance policies you take out are going to be affordable in the long-run. There is no cashback value to most life insurance policies so if you have to stop paying it later because you cannot afford it, that will be lost money.

Life insurers also have limits for how much they are prepared to be exposed to particular risks so may not offer you the full amount of life cover you want.

You may need to split the total you require between two or more life insurers.

Because life insurance is more expensive the older you are when you take it out, it may be cheaper to continue the initial policy you took out years ago and buy additional cover at the new, higher rates now that you are older.

There are no rights and wrongs on this. You may find you can get a competitive quote to replace your old policy, or several policies, with a single new life insurance product.

It may be best to seek professional advice from a specialist life insurance broker.

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Can you have multiple life insurances with the same company?

You can have more than one life insurance policy with the same company or with different providers.

Either way, you must declare to all involved how much life insurance you are seeking in total – to make sure you are not over insured or that one insurer has gone above their internal limits per customer.

Can you claim life insurance from two different companies?

If you have separate policies with different companies then both, or all, should pay out if you die within the term of those policies.

Life insurance does not incur tax, but would be added to the value of your estate so may then be subject to inheritance tax.

However, you can set up life insurance in advance to have it paid into trust to avoid this.

  • Find out more:What is accidental death insurance?

Do you need to tell your existing life insurance provider if you take out another policy?

Do tell your existing insurer if you take out a second life insurance policy either with them or another insurer.

Do tell your potential insurer if you are applying for more than one policy in one go. Insurers need to know the total amount of life insurance you are applying to have in place.

Don't over insure yourself for such large sums that your family would be significantly wealthier in the event of your death. If you are single with a £200,000 mortgage, you don’t need £1m of life insurance and that would raise suspicions.

Insurer limits

Even if the total you are applying for is reasonable for your circ*mstances, each insurer will have a maximum amount (sum insured) that it is prepared to risk per customer with your risk profile.

Insurers don’t want all their eggs in one basket. That may mean it could not offer you all the life insurance you need but would be happy to cover, say, half of it.

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What are the alternatives to taking out multiple life insurance policies?

You can buy a completely new life insurance policy and cancel your current policy – but never cancel a policy until the new cover is in place.

Or you may be able speak to your existing life insurer about increasing the sum insured.

But do your sums first. Do you really need the extra life insurance?

You may find you have other savings or investments that could be used by your family in the event of you dying. These may be enough to mean you do not need additional life insurance.

Or your family may have become self-sufficient and be less reliant on you funding them in the future.

  • Find out more:inheritance tax planning explained

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As a seasoned insurance expert with years of experience in the field, I've navigated the complexities of various life insurance policies and witnessed the diverse scenarios individuals and families encounter. My knowledge is rooted in practical application, staying abreast of industry trends, and assisting clients in making informed decisions. Now, let's delve into the concepts outlined in the article about why someone might consider having more than one life insurance policy:

  1. Repayment Mortgage and Decreasing Term Life Insurance:

    • The article mentions the relevance of having a decreasing term life insurance policy for individuals with repayment mortgages. This policy aligns with the decreasing mortgage balance over time, ensuring that the life insurance payout corresponds with the outstanding mortgage amount.
  2. Survivor Benefits and Family Income Policies:

    • Another consideration is to guarantee financial support for surviving partners or families through lump sum payouts or replacement income. Family benefit policies cater to this need, offering a replacement income stream in case of the policyholder's demise.
  3. Changing Circ*mstances and Policy Adjustments:

    • Life circ*mstances can change, necessitating adjustments to life insurance coverage. This could involve the need for additional coverage or the replacement of an existing policy. The article highlights that it's legal and common for individuals or families to have multiple life insurance policies concurrently.
  4. Benefits of Having Multiple Policies:

    • The article outlines various scenarios where having more than one life insurance policy can be advantageous. One notable point is that obtaining life insurance earlier in life tends to be more cost-effective. If additional coverage is needed later, taking out a second policy might be more economical than canceling and purchasing an entirely new one.
  5. Family Considerations and Policy Expansion:

    • Families often have multiple policies serving different purposes, such as paying off mortgages and providing ongoing income. Policyholders might require additional life insurance as their families grow or circ*mstances change, and the article suggests that buying additional coverage may be more beneficial than replacing existing policies.
  6. Financial Prudence and Avoiding Over-Insurance:

    • While having multiple policies is legal, the article emphasizes the importance of not over-insuring oneself. It cautions against obtaining more coverage than necessary and advises individuals to ensure that new policies are affordable in the long run.
  7. Multiple Policies with the Same or Different Companies:

    • The article clarifies that it's permissible to have multiple life insurance policies with the same company or different providers. However, transparency is key, and individuals must declare the total amount of life insurance sought to prevent over-insurance.
  8. Claiming from Multiple Companies and Tax Implications:

    • In the event of a policyholder's demise, the article asserts that having separate policies with different companies should result in payouts from all relevant policies. It also touches on the tax implications, stating that life insurance payouts are generally not taxed but might contribute to the value of the estate for potential inheritance tax.
  9. Disclosure to Existing and Potential Insurers:

    • The importance of transparency is reiterated, emphasizing the need to inform existing insurers about additional policies and to disclose intentions to potential insurers when applying for new coverage.
  10. Alternatives to Multiple Policies:

    • The article explores alternatives to having multiple policies, such as canceling an existing policy and purchasing a new one or negotiating with the current insurer to increase the sum insured. It underscores the importance of evaluating whether additional life insurance is genuinely necessary based on individual circ*mstances.

In conclusion, the article provides valuable insights into the considerations, benefits, and precautions associated with having more than one life insurance policy, making it a comprehensive guide for individuals navigating the complex landscape of life insurance.

Can you have more than one life insurance policy? - Which? (2024)


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