Experts Suggest Buying Multiple Life Insurance Policies – Business Insider
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While many believe each person can only have one life insurance policy (and one death benefit) in place, this common misconception couldn’t be further from the truth. Not only can you have multiple life insurance policies on yourself or your spouse or partner, but insurance agents maintain there are instances when you should have more than one policy.
This means you can keep whatever life insurance you have and still buy more coverage if you feel you need to. Heck, you can even purchase multiple life insurance policies at once. I talked to some life insurance experts to find out when it makes sense for individuals to have several life insurance policies.
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Steve Sanders, who serves as the senior vice president of life distribution at F&G, says that workplace life insurance coverage can be a great benefit to employees. However, it shouldn’t necessarily be the only coverage workers have in place.
For starters, Sanders says the total death benefit of workplace coverage tends to be limited and may not provide enough coverage to meet the full financial needs of a surviving spouse or beneficiary. Not only that, but workplace coverage is tied to a job, so you can lose it if you switch careers or move to a new position.
“Adding separate insurance coverage outside of the workplace can supplement the total coverage amount and ensure a portable benefit as the individual moves from company to company,” said Sanders.
Financial advisor R.J. Weiss, founder of The Ways to Wealth, says there’s a strategy in the life insurance business known as laddering that seems to work well for families. Individuals who opt to ladder policies will purchase multiple policies at different term lengths in order to secure the ideal amount of coverage for different segments of their working life.
For example, Weiss says you can buy both a 20-year and 30-year term policy that both begin at the same time. With this strategy, the 20-year term policy should expire around the time your savings have grown enough that you no longer need both policies in force.
While this advice also ties into laddering, financial advisor Daniel Adams of CEG Life Insurance Services says there are many instances where individuals need a larger death benefit for some periods of their lives and not others.
When you are young and are newly married you may only need (and can only afford) just enough life insurance to provide a financial cushion and support for your spouse if you were to pass away unexpectedly, he says. When kids come around, however, it may become apparent that you need to add more coverage.
Life insurance agent Steven Ogle of Redwood Life Group says it’s fairly common for families to invest in a standard, 20-year term life insurance policy when each of their children are born. This gives them layered coverage that lasts throughout the childhood (and potentially into college) for each of their dependents.
Sahang-Hee Hahn, who serves as head of strategy and planning at Haven Life, says there are many scenarios where people’s life insurance needs change over time. Not only that, but people’s ideas surrounding the whole point of their coverage can also change.
“As people age and begin thinking about building a legacy that will carry on past their lifetime, they may consider purchasing an additional life insurance policy,” said Hahn. “Life insurance can be one of the best ways to guarantee that a person’s hard work and traditions pass on to family generations to come.”
Finally, financial planner Jaimin Garabedian of Assurance Wealth Management says many people have multiple life insurance policies because each type serves a different purpose. For example, he says some people will use smaller life insurance policies for a simple “end of life policy” which will just help the beneficiary with the cost of the funeral. On the other end of the spectrum, however, some people use larger policies to mitigate estate taxes when their assets are passed on.
Garabedian adds that there are those who use life insurance for certain “living benefits” such as long-term care or the tax-advantaged growth some life insurance policies offer.
“With all that in mind, buying multiple policies to cover different purposes is not as uncommon as one would think,” he said.
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