Multiple life insurance policies

Design your own life insurance coverage with the help of multiple policies.

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Life insurance is needs-based. As you move through life, you may see the value in taking out multiple life insurance policies to suit your changing needs. This is a common tactic – but just know that you’ll have to justify the coverage to your insurer.

Can I have multiple life insurance policies?

Yes, it’s legal — and common — to own multiple life insurance policies. Life insurance is flexible, and many people invest in policies with different term lengths and coverage amounts as their needs change. This strategy is known as “laddering,” and it’s a good way to layer your coverage so that it tapers off as your financial obligations do.

How to ladder life insurance policies

Let’s say you’re a young parent who’s just taken out a 30-year mortgage. You might purchase a 30-year term life policy to match your mortgage, and a 20-year policy to carry your kids through college, when they enter the workforce and start earning their own money. With this strategy, the goal is to only have as much coverage as you need for that time in your life.

Case study: How a ladder strategy works

Meet Sarah, a healthy, 30-year-old female living in Calgary. She’s a new parent, and she has a 30-year mortgage and 10 years’ left on her student loan repayments.

She could ladder her life insurance policies so that they expire at the same time as her financial obligations, with sample rates to show how much she could expect to pay for coverage.

With these three policies, Sarah will have life insurance coverage for the next 30 years. But each policy will expire as she meets her financial obligations.

  • For the first 10 years, she’ll pay $56/month for all three policies, until her student loans are payed off.
  • For the following 10 years, she’ll pay $49/month for two policies, while her children get through school.
  • For the final 10 years, she’ll pay just $35/month for one policy, until she finishes paying off her mortgage.

*Sample rates from PolicyAdvisor, June 2020

Reasons for owning multiple life insurance policies

In these situations, it might make financial sense to have multiple life insurance policies:

  • You need more coverage. Let’s say you get married, buy a home or have a kid. Rather than boost the limits on your current policy, you could buy a separate policy to cover those financial obligations.
  • You have several debts to pay. Some people purchase term life insurance policies that are due to expire at the same time as their debts. This is known as the ‘laddering’ strategy. For example, if you have 10 years’ worth of student loans and a 30-year mortgage, you might buy a 10-year and a 30-year policy. That way, your beneficiaries won’t be burdened with your debts if you die prematurely, and you won’t be paying for unnecessary coverage after you’ve payed off your loans.
  • You want to supplement the life insurance you have through your employer. Typically, group life insurance offered by employers caps out at low amounts, like $50,000. If your financial obligations exceed $50,000 and you have the room in your budget, it’s a good idea to buy another policy privately.
  • You want different coverage to meet different goals. The main purpose of life insurance is to replace your income when you die. But there are other reasons why you might want to purchase additional coverage, including estate or retirement planning, protecting a small business, securing a loan, or covering long-term care. Multiple life insurance policies can come in handy in those instances.
  • You’re interested in both term and permanent coverage. On a similar note, you might want to combine a term and permanent policy to a) secure your family’s financial future and b) offer benefits during your lifetime. Permanent policies build cash value over time, and many providers offer added protection, such as critical illness riders.
  • You want to mitigate risk. Most life insurance companies are vetted by financial ratings agencies, which assess their long-term financial health and publish the results. But if you don’t like the idea of relying on one provider to pay out your claim, you could consider buying policies from two or more companies.
  • You can afford additional coverage. Some life insurance is better than none. So, if you could only afford a 10-year term policy at 25, but five years later, you’re in a position to add a longer term or permanent policy to your life insurance lineup, you might do that.

Pros and cons of having multiple life insurance policies

Pros

  • Design your own coverage. Purchase coverage as your family and financial obligations change for peace of mind.
  • Save money over time. By laddering policies, you may end up paying lower premiums than if you purchased one, larger policy.
  • Protect your business and personal life. You can take out policies to cover your family as well as key workers in your business so that the show can go on if they’re unable to work.
  • Diversified coverage. As you learn more about life insurance, you may want extra protection that isn’t offered by your current policy, like a terminal illness rider, disability protection, or accidental death and dismemberment coverage.

Cons

  • More admin. To ensure you have enough coverage, you’ll have to track when each of your policies is expiring.
  • Several premium payments. You’ll need to stay on top of your premium payments each month, as they might have different due dates or amounts.

Is there a limit to how much life insurance coverage I can buy?

Life insurance companies don’t have specific limits on how much coverage you can buy – it just has to be reasonable. When you apply, the insurer will ask about your current coverage, income and assets. If the total coverage would exceed 20 to 30 times your income, this may raise a red flag. Otherwise, as long as they think you have an insurable interest and can afford the repayments, you shouldn’t have a problem.

Legally, life insurance companies that are members of the Medical Information Bureau (MIB) have to share important information about applications with the MIB. This process benefits both you and your insurer: it helps to prevent fraud, and it also ensures that multiple companies aren’t insuring you beyond your reasonable limits.

Compare life insurance companies

Name Product Types of Insurance Coverage Range Issue Ages Medical Exam Required Province Availability
PolicyMe life insurance
Life Insurance
$100,000 - $10,000,000
18 - 80 years old
No
Ontario, Alberta, Manitoba, New Brunswick, British Columbia
Get advice and compare life insurance quotes from multiple companies in the industry with PolicyMe.
 Life Insurance Through PolicyAdvisor
Life Insurance,Mortgage Protection,Disability,Critical Illness
$25,000 - $5,000,000
18 - 72 years old
No
Ontario
Policy Advisor is a digital life insurance brokerage that has partnerships with 17 insurers in Canada.
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Multiple life insurance claims

Provided that your claim satisfies the terms and conditions in the policy, there should be no reason why you can’t file your claims on multiple life insurance policies. However, it’s important to remember that the eligibility of the claim will be determined by each individual insurer who will likely have their own specific set of rules and regulations.

Will additional policies payout benefits in a claim?

Yes. You can receive payment from both policies if you satisfy the conditions of both policies.

Can I nominate multiple life insurance beneficiaries?

Yes. Most insurance providers will allow you to nominate multiple beneficiaries in the event of a life insurance claim — the number of beneficiaries you’re allowed may vary between providers.

Common life insurance beneficiaries are your partner, spouse and or children. However it’s not uncommon to have a beneficiary be other family members, such as siblings or aging parents, business partners or other individuals who are financially dependent on you.

How to split up what’s paid to your beneficiaries

You’ll have to determine a percentage split for your beneficiaries — this will determine who gets what share of the benefit.

It’s important to keep your nomination current to account for any circumstantial changes such as separation, divorce or death. This will ensure that the benefit doesn’t end up anywhere other than with your intended recipients.

Bottom line

Life insurance isn’t a cookie-cutter product. The amount of life insurance you buy should be driven by your financial needs – whether that’s a family, a home, or a business. If your needs change, you might consider purchasing multiple policies to cover them. To make sure you’re squeezing the most value from your policies, compare life insurance providers.

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