Can I have more than one life insurance policy?

There’s no legal limit to how many life insurance policies you can hold. So is it better to have more than one? We take a look.

There’s no legal limit to how many life insurance policies you can hold. So is it better to have more than one? We take a look.

Faith Archer
Insurance expert
5
minute read
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Last Updated 3 OCTOBER 2022

Holding multiple life insurance policies – what to know

You’re allowed to have more than one life insurance policy, but that doesn’t mean you should have a fistful. Often, it’s better to have a single policy that meets all your needs. There are times, however, when it’s worth having multiple policies – it depends on your circumstances. Here are the facts about having more than one life policy.

1. It could mean that 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). 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. You may need specialist cover

If your circumstances change, you should check if your protection insurance still meets your needs. For example, if you get married or have a baby, you might consider critical illness cover or income protection insurance, so your new family could still pay the bills if you were ill or unable to work.

Say you start 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 die unexpectedly.

3. Consider whether it’s worth amending your current life insurance policy or buying another one

If you already have life insurance, it’s important to regularly review your policy. You may have had another child or re-mortgaged, 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. If you take out a new policy elsewhere, it could end up costing you more.

Talk to your insurance provider to find out if it’s possible to change your cover or the terms of your policy.

4. Consider adding extra cover to your policy

Many people have one life insurance policy with different add-ons, rather than taking these 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 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 ‘waiver of premium’ helps cover the cost of your insurance if you’re unable to work because of illness or injury.

5. Think about whether you want separate or joint life insurance

If you’re in a relationship, you may have invested in joint life cover. This covers two people and typically pays out when the first partner in the couple dies. This is when the policy 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.

Life insurance gets more expensive the older and more ill you are, so applying for a new policy down the line could mean you face paying higher premiums.

6. Check you don’t 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 just 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, for example, should 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’s a few reasons you might want more than one life insurance policy, for example:

  • You took out a life insurance policy when you were much younger and you now want to increase your cover. If your provider won’t agree to this, it makes sense to keep your existing cover in place and take out a new policy to top it up.
  • You want policies that cover different needs over different time periods. So you might take out one policy that will cover your mortgage term and another that will give your family a lump sum or income while the children are 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 better quote alongside your old policy.
  • 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 example.
  • You want a new policy to cover new beneficiaries, so the pay-out from your current policy won't have 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 simple life insurance calculator. Then you can start comparing policies with us.

Things to do right now

No-one likes thinking about death, but sorting out life insurance can provide peace of mind that the people you care about will be protected financially if the worst happens.

Take a few minutes to consider your life cover before it falls off your to-do list:

  • Dig out details of any existing life policy. How much would it pay out? Is it enough to pay the bills and keep a roof over your family’s head if you weren’t around?
  • See if you have death in service as a benefit at work. Ask HR if you don’t know. Then review whether you might need extra life cover on top.
  • If you have dependents, consider policies that would provide financial help if you didn’t die but still 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 kids leave education or your pension starts.
  • If you’re in a couple, weigh up whether you want a joint life insurance policy or would be better off paying slightly more for the flexibility of two individual policies.
  • Review your cover if circumstances change, such as getting married or divorced, having children or taking out a bigger mortgage. Make sure you’re not over-insured or – more importantly – under-insured.
  • If you’re not sure what you need, talk to an independent financial advisor.

Frequently asked questions

Do I need more than one life insurance policy?

Not necessarily, no. If you’re looking to extend your cover, it might be a good idea to ask your current provider if this is possible, and check if it’s cheaper than taking out a new policy. However, if your current policy covers something specific, like your mortgage, you may need to take out a new policy to cover a different financial need.

How many life insurance policies can I have?

There’s no legal limit on the number of life insurance policies you can have, and you may want to take out more than one to cover all your financial needs.

Can I have life insurance policies with difference insurance providers?

Yes. There’s nothing to stop you taking out different policies with different insurance providers.

Can I have multiple life insurance policies with the same insurance provider?

Yes, and it may make sense to do so if you’re insuring for a specific financial need, for example family income benefit.

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 for the increased sum
  • A new policy for the whole amount would be
  • An additional policy would cost. 

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