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Is It Okay to Have Multiple Life Insurance Policies?

Is It Okay to Have Multiple Life Insurance Policies?

| @indiablooms | 25 May 2020, 08:00 am

Life insurance is an essential part of financial planning and can provide a level of security that allows you the peace of mind to know that your family will be taken care of if you are no longer around.

You can buy term insurance to cover specific liabilities such as a mortgage and you can buy a life insurance policy as part of your plans to take care of the future, whatever it holds, but the question you may want an answer to is whether it is okay to have multiple policies in place.

Here is an overview of life insurance and the question of multiple and single policies.

Why you might end up with multiple life insurance policies

Couples regularly find themselves holding a number of different insurance policies and products, singularly and as a couple.

It can actually good planning to have separate policies and you might have taken out cover before you met your partner and started making plans together.

Couples can often buy a joint policy that covers both lives, paying out when one of them dies and this may well be in addition to having their own individual policy.

Your life plans and goals can often change as time goes by and that means you may want to take out extra life cover, which can be done by potentially topping up the amount of cover you already have with a life insurance provider or arranging an additional policy.

It might also work out to be more cost-effective two have two single-life policies rather than a joint one, and these are typical reasons why you might end up with more than one life policy.

Is it better to only have one life policy?

The obvious question you might ask is whether it is actually easier and more advantageous to have one life insurance policy that covers all of your financial needs.

There is not a totally straightforward answer to the question of whether it is better to stick to having the one life policy as it depends on your circumstances and even when you took out the first policy.

For example, your financial circumstances might have become more complex since you took out your original policy and you may be looking to plan for retirement and inheritance matters at some point.

Taking out a second life insurance policy provides you with an opportunity to have that policy written in trust if that makes sense and is possible from a tax planning perspective.

It is always a good idea to get professional guidance with regard to tax planning and using life cover in this respect, but that is one scenario where it proves better to have more than one policy rather than rely on a one-size-fits-all approach.

If you run a business

Another prime example where it would be perfectly okay to hold multiple life insurance policies is when you have a business and need to protect your business as well as your family if anything happened to you.

In summary, it can sometimes be better to amend the terms of your current policy, and other times it is better and perfectly okay to have more than one policy.

One thing is for sure, you wouldn’t want to be without cover.

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