Yes, 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 insurance 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 circumstances based on obligations and needs.
In this article we'll look at:
- Why might you want to arrange more than 1 life insurance policy?
- Will I need to attend a medical for extra life insurance?
- Is it cost effective to have multiple life insurance policies?
- What are the advantages of having more than 1 life insurance policy?
- How to buy the best life insurance at the cheapest price
- Can I have 2 critical illness policies?
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 annual 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.
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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:
- Ask your insurance provider if you can increase the term of your original life insurance
- Search for a replacement life insurance that will cover you for longer
- 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 life insurance policies altogether. 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 level of cover 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.
Life insurance to cover your mortgage if you were to die can be arranged on a decreasing basis if you have a repayment mortgage and this is generally cheaper than level term life insurance. However, level term life insurance could benefit those who intend to take on a bigger mortgage in the future as they may not need to change life insurance which gets more expensive with age.
Single life insurance policies can create flexibility in your choices but also ensure that a surviving partner continues to be covered with life insurance if one partner dies and their life cover pays out. Joint life insurance is only marginally cheaper than two single life insurance policies.
Dividing your needs up and allocating life insurance policies for each need means you may end up with multiple life insurance policies which may or may not save you money in the long run.
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
Can I have two critical illness insurance policies?
Yes, it is possible to buy multiple critical illness policies and each policy should pay out in the event of a claim if you are diagnosed with one of the illnesses covered by the critical illness insurance terms and conditions. Insurance companies will check that there is insurable interest for the amount of critical illness cover you have overall, across all your critical illness policies to determine that this is financially justified.
Usually, you can buy critical illness cover up to around £500,000 before the insurance company will ask you for financial evidence which could include a mortgage statement, a P60 statement of earnings or other details that would prove that a serious illness would result in a level of financial loss that is in line with the amount of cover applied for.
Each critical illness insurance provider covers a slightly different list of illnesses so it could be that not all of your policies will cover your diagnosis. However, all critical illness insurance policies cover a core list of illnesses which have to meet a standard set by the Association of British Insurers so the main causes for claims such as cancer, heart attack and stroke will usually result in a paid claim.
Reasons to choose single life critical illness cover
In fact, if you are choosing between buying a joint critical illness insurance policy with your partner and two separate ones, you should opt for two separate critical illness insurance policies. There are two reasons for this - the first is that if you or your partner were to be diagnosed with an illness that they had to claim for, the other person's cover would continue unaffected and the second is that if you have children and they were to be diagnosed with an illness, you would be paid under the children's critical illness cover on each of your policies, potentially doubling the claim money.
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. You may come across online life insurance calculators but most of these are fairly basic and cannot give advice based on your specific circumstances even though they may provide some steer in helping you identify the amount of life insurance you need. As with many financial products 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 and compare life insurance policies, old and new, 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.
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