Can you have more than one life insurance policy?

In theory, you can have multiple life insurance policies. We've worked out the pros and cons of having more than one policy and what to look out for.

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Legally you can have as many life insurance policies as you like but instead of buying more policies, it might be better for you to change an existing one if you can.

There’s no legal limit to the number of life insurance policies one person can open; some people have one provided by their employer, and then a personal one as well. How many you have, and what kinds they are, will depend on what you and your family need.

How many life insurance policies can I have?

Most people will usually only have one or two life insurance policies but each policy will exist in its own right and if you wanted to you could have more than this.

Unlike with motor or home insurance, you could buy multiple life insurance products to cover different aspects of your life.

For example, you may want a decreasing term life insurance policy to cover your mortgage costs and a fixed-term insurance policy to provide financial assistance for other costs such as household bills or education fees in the event of your death.

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

If you have more than one life insurance policy, when you die your dependents should be able to make a claim on each policy and receive a payout for each one.

This will depend on factors such as how you died and how the policies are set up but in theory each policy will provide a financial payout.

While this may sound appealing, it’s also worth remembering that you’ll need to pay the premiums on each policy while you’re alive.

The payout amount of the different policies may also vary. This is because when you take out a policy the insurer will look at what cover is already in place to ensure the policy you’re buying will provide the right amount of cover for you. If you have one policy to cover your mortgage costs, for example, and one for your children’s everyday finances the payout will reflect this.

How to implement multiple life insurance policies

When you buy a new life insurance policy, you’ll need to tell the insurer what cover you already have in place.

If you do die when the policy is in place, your dependents should be able to claim on the policy, although this will depend on the circumstances of the death and the policy or policies you have.

What types of life insurance policies can I have?

There are lots of different types of life insurance and the following are the most common you could buy.

    • Decreasing-term life insurance: This type of life insurance is one of the cheapest policies you can buy. It is designed to cover the cost of a mortgage, although the money can be used for other purposes, and during the term of the policy the overall payout decreases. This means if you die early on in the term of the policy there will be a higher payout, because at this point there will also be more to pay off the mortgage.
    • Fixed-term life insurance: With this insurance, you choose a term and an amount of money to be paid out if you were to die. Then if you do die at any point in this term, the policy will pay out the fixed amount. If you decide, for example, you want the policy to pay out £200,000 if you die within a 20-year period, it should pay this amount out no matter when you die during the 20 years.
    • Whole-of-life insurance: This insurance tends to be more expensive because it does what it says on the tin, provides life insurance cover for the whole of your life. This means the policy should pay out a sum of money at any point in your life to your dependents.
    • Over-50s life insurance: You can only buy this kind of life insurance if you’re 50 and over and it has a lot of caveats so it’s well worth doing your research first before taking it out. You don’t need to give the insurer any details of your medical history, but usually it won’t pay anything out if you die within the first 12 or, with some policies, 24 months.
    • Life insurance through work: It’s common these days to have life insurance attached to your employment contract. Usually this type of insurance will pay out three or four times your salary. If you earn £30,000, for example, it could pay out £120,000.

Multiple policies as a business owner

If you own your own business, you may want to take out life insurance to ensure that if a business partner were to die, the business could still carry on operating. In this instance it may be possible to take a joint life insurance policy out between different partners in the business.

Another option is called ‘key person insurance’ which is designed to protect the business if a key person dies or is diagnosed with a critical illness.

Pros and cons of having multiple policies

Pros

  • You will be able to buy different policies for specific aspects of your life or work.
  • Taking out a new policy could be cheaper than changing an existing one in some circumstances.

Cons

  • You’ll have to pay premiums for every policy
  • It may be cheaper to take out one policy which provides the same, or more, cover than taking out multiple policies
  • There’s a lot more admin with managing multiple policies

Bottom line

Before you buy any policies, it’s important to take the time to weigh up how useful it will be.

If you’re looking to extend cover, and it’s possible to change your existing policy, rather than buying a brand new one, this might be a better option for you. Similarly, having just one policy could be easier, and cheaper, than having lots of different policies.

If you’re unsure, it might be worth seeking advice from a specialist, although remember you may have to pay for this.

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