Certainly, each and one of us need life insurance in case our death would hurt anybody financially. For many people, just one life insurance policy will be sufficient, but for others, two or even more really make sense. With that being said, you should know that your needs drive the quantity and kind of policies that you should buy.
How Many Life Insurance Policies Can You Buy?
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You can buy multiple policies from different insurance companies. But then, according to Brian Ashe, Executive VP of Life Happens, an educational non-profit supported by insurers; the moment you apply, the insurers will ask regarding your coverage to ensure the amount you want is realistic and reasonable.
In addition, Ashe also stated that you can purchase a lot of insurance without any problem. Nevertheless, the insurers will normally ask for an explanation in case the total coverage would go beyond 20 to 30 times your earnings.
Multiple Term Life Policies Brief Background
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The most typical reason why an individual buys coverage is to replace earnings in case the main source of income dies too early. The solution here is the term life insurance, which covers you for a specific period of time, which can be 10, 20 or 30 years. Preferably, by the time the said term expires, you don’t necessitate a life insurance since the debts are already paid and your kids are grown up.
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As an alternative to buying one huge insurance policy, you could purchase multiple policies of not the same lengths and amounts to equal the needs as time passes by. For instance, instead of having a 30-year $1 million policy, you could purchase three policies such as the following:
- 10-year, $500,000
- 20-year, $300,000
- 30-year, $200,000
According to Dennis Rupp, director of insurance wholesaling at TIAA, a financial services provider, this ‘laddering’ stratagem can help you save money. Additionally, this kind of strategy can work if coverage needs diminish and you can correctly calculate them.
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On the other hand, Ashe stated that if you decide to purchase just one insurance policy and you discover later on that you don’t need as much life insurance, most insurance providers will allow you to reduce the coverage and pay a smaller amount.
Different Insurance Policies For Different Goals And Objectives
Perhaps, you may possibly have other motives in buying policies aside from replacing income. Here are some of the examples:
- Small-Business Owner Prerequisites
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You may possibly necessitate a term policy that will handle your family’s needs and another one to cover your business loans or fund a buy-sell contract.
- Estate Planning
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In case you wanted to leave life insurance money to somebody no matter when you pass away, you will necessitate a permanent policy like the whole life. Chris Chen, a certified financial planner at Insight Financial Strategists in Waltham, Massachusetts, recommends buying term life for predetermined necessities (the period when others are still depending on your earnings) and picking a permanent policy for the estate planning.
- Long-Term Care
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For some reference, a hybrid life insurance policy can be utilized to pay for long-term in case you needed it. On the other hand, if you don’t max out the benefits and paybacks for care, it will pay out at death. You might perhaps, own a traditional life insurance that will take care of your financial dependents and a hybrid policy that will cover long-term care.
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