Can I have more than one life insurance policy?
Having multiple life cover plans can be beneficial in certain circumstances. We look at when you might need separate policies and whether paying for more than one life insurance policy could be right for you.
Having multiple life cover plans can be beneficial in certain circumstances. We look at when you might need separate policies and whether paying for more than one life insurance policy could be right for you.
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. As a rule of thumb, your cover typically can’t exceed 15 to 30 times your annual income, depending on your age.
There are times when it’s 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 pay-out 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 and your estate is worth less than £2 million).
This could mean your beneficiaries end up paying less inheritance tax. However, estate planning can be complex and we recommend speaking to an accountant or tax advisor for help.
You can do your own research beforehand, however, by reading our guide to inheritance tax.
2. Do you need specialist cover?
If your circumstances have changed, check if your protection insurance still meets your needs. For example, if you’ve got married or had a baby recently, you might consider income protection insurance so your new family can still pay the bills if you become ill or unable to work.
If you’ve started a business, you might want 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?
If you already have life insurance, it’s important to regularly review your policy. You may have had another child or remortgaged, for example, which will affect how much cover you need. Once your children grow up or you pay off your mortgage, you may well find you need less cover.
It’s normally fairly easy to amend your policy. You might want to change the policy length (the term), increase or decrease your pay-out, or add extra cover.
Talk to your insurance provider to find out if it’s possible to change your cover or the terms of your policy.
4. Can you add extra cover to your policy?
Many people have one life insurance policy with different add-ons, rather than taking out extra cover 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 listed in your policy.
Other extras to think about adding include terminal illness cover, where you receive a pay-out if you’re diagnosed with a terminal condition. And a ‘waiver of premium’ can cover the cost of your monthly life insurance premiums if you’re unable to work because of illness or injury.
Be aware that you can only add a waiver of premium when you take out a life policy – 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, leaving the surviving partner without any cover.
While there are advantages to joint life insurance, 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 unhappy event you both die, your beneficiaries will get two pay-outs.
6. Do you already have life insurance in place?
If you’re working and have a benefit called death in service, then you already have some life insurance in place. With this type of policy, the pay-out 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 to decide 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. And 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 more than one life insurance policy. For example:
- You took out a life insurance policy when you were younger and you now want to increase your cover. If your provider won’t agree to this, it could make sense to take out an additional policy to top up the existing one.
- 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 changed your lifestyle (by giving up smoking, for example) 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 – because it’s written in trust, for instance.
- You want a new policy to cover new beneficiaries, so the pay-out 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.
Before you use it, there are a few things to consider:
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Can I have multiple life insurance policies with the same provider?
You can have more than one life insurance policy with the same provider – which 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.
Using the same provider can also be helpful as all your policies will be in one place.
But there’s nothing stopping you from taking out different policies with different insurance 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 could be limits on the amount of cover you can take out in total.
And remember that each life insurance policy you have comes with separate monthly premiums, even if they’re with the same provider.
Claiming on more than one life insurance policy
If you have multiple life insurance policies, your beneficiaries could make a claim on each one if you die while the cover is still valid. This applies whether your policies are with the same provider or different ones.
Claiming on two life insurance policies could lead to a larger pay-out overall, so it’s important to let your loved ones know where they can find the policy details. This should make the claim process easier for them at what is already likely to be a difficult enough time.
Frequently asked questions
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 how much:
- Your existing provider would charge to increase your cover
- A new policy for the whole amount would be
- An additional policy would cost.
Can I have multiple beneficiaries on a life insurance policy?
Yes, 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 ask if you can change your policy. They 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. Bear in mind your premiums may change.
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Tim Knighton - Life, health and income protection insurance expert
For over 20 years, Tim’s been building and managing relationships with big brands for the benefit of customers. As our expert on all things life, health and income protection, he’s working hard to find the right products that look after you and those you love most.
Faith Archer - Insurance expert
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 aims to make money matters easier to understand, with practical tips on everything from household bills and family budgeting to investments, pensions and tax.