60-second summary
Need the scoop on whether you can have more than one life insurance policy in under a minute? Here’s our summary:
There’s no limit to the number of policies you can have at once
Regardless of how many policies or how many providers, your overall cover limit is generally capped at between 15 and 30 times your salary.
Multiple life insurance policies could make sense if your beneficiaries might inherit more, you need specialist cover or your needs have changed and you can’t amend an existing policy.
Before taking out life insurance policies, check whether you already have cover. If you’re employed, you may be eligible for ‘death in service’ benefit.
Consider the cover limit needed to pay off your financial obligations, whether the cover term would pay out when needed most (i.e. during your mortgage term) and what type of policy/policies would best suit your family’s needs.
As always, the easiest way to find the right cover at a price that suits your budget is to shop around and compare quotes.
How many life insurance policies can I have?
There’s no limit on the number of life insurance policies you can have. But insurance providers will look at your total cover amount when working out how much to insure you for.
As a general rule of thumb, your life insurance cover can’t usually exceed 15 to 30 times your annual income, depending on your age.
There are times when it might be worth having multiple policies to cover all your financial needs. But this will depend on your personal situation and the flexibility offered by any existing cover you have.
Here are six key questions to ponder if you’re considering multiple life insurance policies:
1. Could your beneficiaries inherit more?
Taking out a second life insurance policy written in ‘trust’ could keep any payout separate from your estate. Your estate is the total sum of all your money, property and possessions when you die.
Pay-outs from life insurance policies written in trust don’t count towards the inheritance tax threshold. This is currently set at £325,000 for one person or £500,000 if you leave your home to your children or grandchildren.
This could mean your beneficiaries end up paying less inheritance tax. Estate planning can be complicated, so we recommend speaking to an accountant or tax advisor for help before making any big decisions.
Read our guide to inheritance tax to get some tips beforehand.
2. Do you need specialist cover?
You may need specialist help in getting a life insurance policy if your employment is considered higher-risk or you have existing health conditions.
If your circumstances have changed and your insurance no longer covers your needs, you may want to re-evaluate your policies. Besides life insurance, you might also want to consider other types of insurance that cover different aspects of protecting you against financial risk.
For example, if you have a mortgage or rent to pay, have just got married or have recently had a baby, you might also want to consider income protection insurance in addition to life insurance. This could help you pay the bills if you become ill or unable to work.
If you’ve started a business, you may wish to take out key person insurance. This could protect your company against the financial impact of losing a key employee if they become critically ill or die unexpectedly.
3. Can you amend your current life insurance policy?
It’s normally fairly easy to amend an existing life insurance policy. You might want to change your policy's length (term), increase or decrease the payout, or add extra cover.
It’s important to regularly review your policy to ensure it still meets your needs. If you’ve had another child or remortgaged, for example, this can affect how much cover you need. Likewise, once your children grow up or you have paid off your mortgage, you may find you need less cover.
Before taking out additional life insurance policies, talk to your current provider to find out if it’s possible to change the cover you already have.
4. Can you add extra cover to your policy?
Many people add optional extras to their life insurance policy, rather than taking out extra cover as standalone policies.
One example is critical illness insurance. This typically offers a lump sum payout if you’re diagnosed with a serious condition covered by your policy.
If it isn’t already included in your life insurance, you may want to think about adding include terminal illness cover, where you receive a payout if you’re diagnosed with a terminal condition. It could mean the money is released before you pass away, which can help you cope financially at a difficult time.
A ‘waiver of premium’ can cover your monthly life insurance premiums if you’re unable to work because of illness or injury. You can only add a waiver of premium when you take out a life policy, however – you can’t add it at a later date.
5. Do you want separate or joint life insurance?
If you’re in a relationship, you could choose joint life cover. This covers two people and typically pays out when the first partner in the couple dies. The policy then ends, which means that the surviving partner would need to take out their own cover.
While joint life insurance can sometimes be cheaper and more streamlined, you might prefer to get two individual policies. That way, if you split up, you won’t need to get new cover. Plus, in the event that you both die, your beneficiaries will get two pay-outs.
6. Do you already have life insurance in place?
If you’re working, it’s worth checking whether you have a benefit called death in service. If you do, then you already have some life insurance in place. With this type of policy, the payout is normally a multiple of your salary. For your beneficiaries to receive it, you need to be on the company payroll when you die.
If you have death in service cover, it’s up to you whether you need life insurance as well. If you have a young family, they may need a larger sum to cover the mortgage and bills if you die.
It's also worth noting that if you stop working for your employer, you’ll no longer receive death in service benefit.
Why would I want more than one life insurance policy?
There are a few reasons you might want multiple life insurance policies. For example:
You want to increase your cover but your provider won’t let you – if your needs have changed and your current policy limit can’t be increased, it might make sense to take out an additional policy to top it up.
You want policies that cover different needs over different time periods – for example, you might take out one policy to cover your mortgage term and another to cover your children growing up.
You and your partner would rather have two separate policies than a joint one.
You’ve made some lifestyle changes – for example, giving up smoking, and want to see if you can get a cheaper life insurance quote.
Your family circumstances have changed – and you can’t add new beneficiaries or change beneficiaries on your existing policy. This could be the case if it’s written in trust, for instance.
You want a new policy to cover new beneficiaries, so the payout from your current policy won’t need to stretch to cover them.
How much life insurance do I need?
You can work out how much life cover you might need using our life insurance calculator.
When working out how much life insurance you need, consider the following:
- Do you have an existing life policy? How much would it pay out? Assess whether it’s enough to pay the bills and keep a roof over your family’s head if you die.
- Do you have death in service as a benefit at work? Review whether you might need extra life cover on top.
- If you have dependants, consider policies that would provide financial help if you didn’t die but couldn’t work, such as income protection insurance and critical illness cover.
- Check how long any policies last and if they cover the time when money might be most needed. For example, until your mortgage is cleared, your children leave education or your pension starts paying out.
- If you’re in a couple, weigh up whether you want a joint life insurance policy or two individual policies
Can I have multiple life insurance policies with the same provider?
Yes, you can have more than one life insurance policy with the same provider.
This might make sense if you’re insuring for a specific financial need. For example, you could take out family income benefit. This pays out an ongoing monthly income if you die, which could be used in addition to the lump sum your beneficiaries receive from a standard life insurance policy.
Having all your policies under one provider can also streamline admin. But there’s no harm in shopping around and comparing quotes with different providers. For example, you could have a single life insurance policy with one provider and joint cover with another.
Regardless of how many providers you use, there’ll likely be a limit on the total coverage you can take out. Also, remember that each life insurance policy you have comes with its own monthly premium – even if they’re all with the same provider.
Claiming on more than one life insurance policy
If you have multiple valid life insurance policies when you die, your beneficiaries could claim on each one. This applies whether your policies are with the same provider or different ones.
Claiming on two life insurance policies could lead to a larger payout overall. So it’s important to let your loved ones know where to find the policy details. This should make the claim process easier for them during a difficult time.
FAQs
Is it cost-effective to have multiple life insurance policies?
It depends on your age and situation. For example, if you decide you need a larger pay-out because you’ve moved to a bigger home with a larger mortgage, it’s worth checking the following:
How much your existing provider would charge to increase your cover
What a new policy for the whole amount would cost
How much an additional policy would cost.
If you can get more cover for a better price under separate life insurance policies, then it might make sense to take out more than one.
Can I have multiple beneficiaries on a life insurance policy?
Yes, you can have multiple beneficiaries on a life insurance policy. You don’t have to take out separate policies for each person you want to benefit.
You could assign each named beneficiary a percentage of the pay-out. For example, you may wish to leave 50% to your spouse and 25% to each of your two children to inherit once they turn 18.
How do I amend an existing life insurance policy?
Get in touch with your provider to amend an existing life insurance policy. It may let you change the amount or length of cover or remove someone from your policy.
If they do, they will either amend, top up or replace your existing policy, depending on the changes you want to make. However, bear in mind your premiums may change.
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Tim Knighton is an expert in building and managing relationships with big brands for the benefit of customers, with more than 20 years of experience. He seeks out the right products that look after you and those you love most during the toughest times.
Stephen Maunder is an experienced personal finance editor, having spent more than a decade working for consumer print and online titles. He won several industry awards for his personal finance features at Which?, before becoming Deputy Editor at Compare the Market.
Faith Archer is an award-winning money journalist, previously Deputy Personal Finance Editor at The Daily Telegraph and now a columnist at Yours and blogger at Much More With Less. Faith has written about money matters as a freelance journalist for publications including The Telegraph, The Financial Times, the Sunday Times, Mirror Online, Woman&Home, Woman, Woman’s Weekly and the government’s Money and Pensions Service, as well as appearing regularly on BBC Radio.
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