Can I have more than one life insurance policy?

There’s no legal limit to the number of life insurance policies you can hold, but it can often be better to have just one. We explain why.

There’s no legal limit to the number of life insurance policies you can hold, but it can often be better to have just one. We explain why.

Debbie Thompson
Life insurance expert
4
minute read
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Posted 13 MAY 2021

Holding multiple life insurance policies: Seven things you need to know 

You’re allowed to have more than one life-insurance policy, but that doesn’t mean you should. It’s often better to have a single policy that meets all your needs, although there are occasions when holding multiple policies could be beneficial – it all depends on your circumstances. Here are some of the key things you should know about having more than one life policy.

1. A new life policy could offer new (potential) benefits

Taking out a second life-insurance policy written in ‘trust’, could keep any pay-out separate from your estate – that’s the sum of your money, property and possessions when you die. 

A pay-out from a life policy held in trust wouldn’t typically count towards the inheritance tax threshold (currently set at £325,000 for one person, or £650,000 for couples). This could potentially lower the amount of inheritance tax that your beneficiaries need to pay.  

Read our clear guide to inheritance tax for more information.

2. You might need more specialist cover 

You might explore your life-insurance options if your circumstances change. For example, if you get a new mortgage, you might want a life-insurance policy specifically to cover that.  
 
Or say you start a business, you might take out key-person insurance to protect your company against the financial impact of losing a star performer if they were to die unexpectedly.

3. It may be better to amend the terms of your current life policy, than buy another one

If you already have life insurance, it’s important to review your policy when your circumstances change. You might be having another child or re-mortgaging your home, for example. To review your policy, it’s best to talk to your current insurance provider to find out any costs involved in making changes to your cover or the terms of your policy.  
 
Adjustments you can usually make include changing the length of time your policy runs for (the term), increasing or decreasing the pay-out amount or adding extra cover. Taking out a completely new policy elsewhere could be a more expensive option. 

4. You could add extra cover to a single policy  

Many people choose to have one life-insurance policy with various other products added on at extra cost, rather than taking them out as standalone policies. An example of this is critical-illness insurance. This typically offers a lump sum pay-out if you’re diagnosed with a serious condition that’s listed in your policy. 

Other optional extras you might like to think about adding include terminal-illness cover, where you receive a pay-out if you’re diagnosed with a terminal condition, and ‘waiver of premium’, which helps cover the cost of your insurance if you’re unable to work because of illness or injury. 

5. Two separate policies can be better than one joint deal

If you’re in a couple, you may have taken out joint life cover. This covers two lives, and typically pays out when the first person in a couple dies. At that point, the policy ends. 

While there are advantages to joint life insurance, you might prefer to get two individual policies. If you split up with your partner during the term of your policy, you’d then have to get new cover for yourself. Age is a factor in how much life insurance costs, so you could face a higher premium if you apply for a new policy when you’re older.

6. You may already have (more than) one policy 

If you’re working and you have a benefit called ‘death in service’, you’ll already have some life insurance in place. A pay-out under this type of policy is usually worked out as a multiple of your salary. For your beneficiaries to get it, you’d need to be on your company’s payroll when you die. 

If you do have death-in-service cover, it’s up to you to decide if you need life insurance as well. Many people do choose to get additional protection. After all, your family may have to keep paying the bills and other expenses for many years after you die. And if you stop working for your employer, you’ll no longer be covered by death in service benefit.

7. You could find it harder to manage extra policies

More forms to complete brings added life admin. You might forget that you were looking to find cover in the first place so that you could get on and enjoy life!

Taking the next step with life insurance 

A useful next step is to work out how much life cover you’ll need using our simple life insurance calculator. Once you know how much you need, you can start comparing. 
 
Top tip: review your life cover regularly to make sure you’re not over-insured or, more importantly, under-insured. If you are unsure, speak to an independent financial advisor. 

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