Can you have more than one life insurance policy?

6 min Read Published: 27 May 2022

Buying multiple life insurance policiesYes, you can have more than one life insurance policy. In fact, there are a number of scenarios for which a person would be better off having more than one life insurance policy. We're accustomed to having just one insurance policy for home and car insurance but in the world of life insurance, a person can arrange as many policies as is justified by his or her financial obligations and needs.

In this article we'll look at:

Reasons to buy more than one life insurance policy

Generally, the need for more than one life insurance policy arises through life events that prompt the need for more life insurance. As you move through life and your financial responsibilities increase through growing families or taking on more debt, you could need a bigger lump sum of money or income to support those you leave behind.

Whatever your reason for wanting more life insurance, you should review your existing policy before you just cancel and replace it.  In many situations, it would be better and cheaper to buy a top-up life insurance policy instead of a replacement one.

The type of life insurance you have or wish to buy will determine whether multiple life insurance policies is a good idea too. Term life insurance policies such as level term assurance, decreasing life insurance, mortgage life insurance and family income benefit are easier to replace and top up. Whole of life insurance covers you until you die so you may require some guidance to decide on the best course of action.

6 Reasons to top up your life insurance instead of replacing it

1 - Your age has increased

The younger you are, the less life insurance costs so if you already pay for a life insurance policy that you arranged when you were younger, chances are it is cheaper than an equivalent new life cover policy would be.

Keeping your old policy in place and starting a new policy for the extra insurance that you need could work out to be cheaper, as you'll only pay the higher rate for your current age on the extra cover that you need, retaining the cheaper rates on the old policy. Do take care to ensure that both policies run for as long as you need too though. Some insurers will allow you to increase or reduce the term (the number of years) of the policy.

2 - Your health has changed

Adverse health can increase the cost of your life insurance and sometimes you may be offered restricted terms due to your health. This can mean that you have to pay more for your life insurance or the insurer applies an exclusion to the terms of cover so that your pre-existing medical condition is not covered.

Topping up life cover could be more sensible here as your previous life insurance is likely to be cheaper and less restricted than what you'll find but don't just assume that all insurers will treat your health condition in the same way - some are more lenient than others. Speak to a life insurance expert* to get guidance on which insurers to apply with.

3 - You're now a smoker

Smokers pay around double the rates that non-smokers do when it comes to life insurance. As long as your existing life insurance accurately discloses your smoking status at the time that you bought it, you don't have to tell the insurance company that you've started smoking. Still, you'll need to disclose your smoking status on a new application.

Wherever possible, do try to keep life insurance policies that apply non-smoker rates as these will be cheaper but remember that if you've given up smoking then you can also ask your existing life insurance provider to adjust your premium payments by making a non-smoker declaration. Again, topping up your existing life insurance is likely to be cheaper than replacing it.

4 - Your new insurance is needed for a different number of years

If you've extended your mortgage over a longer period, say from 20 years to 30 years or your family has grown, you may need your life insurance for longer than you had originally bought. The term is the number of years of the policy and this is what you will need to extend. Here are your options:

  1. Ask your insurance provider if you can increase the term of your original life insurance
  2. Search for a replacement life insurance that will cover you for longer
  3. Speak to a specialist life insurance adviser* to work out how to keep your old cover whilst meeting your new needs

5 - You want to keep some of your financial affairs separate

Many people want to ensure that there are no financial squabbles amongst their family and friends after they die. Although you can split the benefits from your life insurance policy amongst different people by allocating a trust to it, some people prefer to arrange separate policies. This could be a simpler and more confidential way to ensure the people in your life get what they need without them needing to confer.

6 - You don't want to put all your eggs in one basket

Even though most large and reputable life insurance companies will have no problems in paying your claim, you might not want to rely on just one. Some people buy policies with different insurance companies in order to spread any risk. There is no real need to do this as insurance companies overall do pay in excess of 97% of claims. Of course, it is down to personal preference and some people will feel a little more comfortable with things arranged this way.

Will I need to attend a medical exam to buy additional life insurance?

Not necessarily but you could be asked to attend a medical exam if you are applying for high-value life insurance. The amount will vary depending on your age with medicals required at lower amounts of coverage for older applicants. These kinds of requests are more likely to be triggered at lower levels for other insurances like Critical illness insurance too.

Is it cost-effective to have multiple life insurance policies?

Not always but in many circumstances, it is cheaper. The savings depend on the details of any existing life insurance you have and should be carefully considered.

It is worth speaking to a specialist life insurance adviser* to help navigate the process for efficiency and to maximise cost savings.

What are the advantages of having more than one life insurance policy?

  • Keep your costs down by arranging what you need over the appropriate number of years instead of taking the total amount for the longest time needed.
  • Keep your financial affairs organised and separated by allocating policies to the people you want to benefit if you die.

What are the disadvantages of having more than one life insurance policy?

  • A new life insurance policy will be priced at your current age and using your existing health and so it may be expensive (when compared to your existing policy)
  • Every policy you buy includes a nominal administration charge and so the more policies you have, the more you pay in administration costs

How to buy the best life insurance at the cheapest rates

Although this article will have given you some food for thought when it comes to topping up your life insurance, it can be difficult to work out what is best for you. It isn't always simple and you can end up paying more than you need and not achieving what you wanted without some expert guidance.

For this reason, we would suggest that you speak to a specialist life insurance adviser who will be able to guide you to the best life insurance quotes after taking all of your considerations on board. We have vetted the services of a specialist life insurance broker* where the advisers are trained to provide regulated advice in order to help you arrange life insurance as well as critical illness insurance and income protection. The advisers are extremely well versed in how applications work and how to avoid unnecessary extra costs to achieve your life insurance goals. You'll also receive bespoke trust advice that allows you to nominate beneficiaries and mitigate inheritance tax on the death benefits.

To arrange a callback from an adviser, complete this form*. The adviser will call you to understand what you're trying to achieve and you'll speak to the same adviser throughout the process.

Additionally, as a Money to the Masses reader, you'll receive up to £100 cashback when you buy your life insurance.

 

If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. This link can be used if you do not wish to help Money to the Masses and do not wish to qualify for the cashback referred to in the article