Did you know that September was Life Insurance Awareness Month? And though life insurance is important to discuss at any time of the year, some features of life insurance go beyond standard conversations.
For example, did you know that you can have multiple life insurance policies at once? One policy is often considered enough, but that may not always be the case.
Below we're outlining the situations that may call for multiple life insurance policies. This information is designed to provide scenarios where additional policies could be beneficial and is not designed to supplement personal advice. Always seek out professional assistance before determining whether you need an additional policy.
When Would You Purchase Multiple Life Insurance Policies?
Life insurance is designed to provide supplemental income to beneficiaries in the unfortunate event of a plan holder's passing. However, a single policy may not be enough to cover all of the expenses of a family.
Purchasing a second life insurance policy is an option for those that wish for additional coverage. Greater protection for loved ones is the largest benefit to this approach, though paying for multiple policies can be expensive. Here are some situations that may call for the purchasing of a second life insurance policy.
The birth of a child, changes in employment, or a new relationship are all examples of life changes we may think of when considering greater coverage. But another factor to consider is personal lifestyle changes, especially those that involve your health – If you've made healthy changes, then a new policy may cost less than before.1 As situations change, so do the monetary needs of those around you. Consider this when examining the needs for life insurance.
According to the U.S. Federal Reserve, average family income decreases as the head of household reaches retirement age.3 Life insurance, on the other hand, tends to move in the opposite direction, increasing as one grows older.2
For this reason, it may be best to establish a plan at a younger age.2 Consider your current expenses to determine whether this will be necessary.
Some financial goals will require long-term payment plans. Assets like cars and homes can take a while to pay off, increasing your monthly expenses by a specific amount for a given period.
Depending on your situation, a second life insurance policy can help account for these added expenses, providing additional income for a period to help offset the added cost until assets are paid off.
Often, these policies are set to different terms and typically referred to as laddering term life insurance.2
Multiple plans may provide more coverage, but be sure to keep track of each policy and costs. Premiums alone are expensive. Though, according to the National Association of Insurance Commissioners, over one billion dollars of life insurance benefits goes unclaimed, as beneficiaries are unable to locate their loved one's policy.4 Be sure to establish proper information to track any new and existing policies.
Whether you need more than one insurance policy will depend on your unique financial and personal situation. If you would like to determine what coverage is right for you or want to speak to someone about your insurance decisions, we're here to help.