September Is Life Insurance Awareness Month: Should You Have Multiple Life Insurance Policies?
Posted by: Joseph Kuo | September 13, 2021
Did you know that September is 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? For most people, one policy is generally considered enough, but that may not always be the case.
Below we’re outlining situations where you might want to consider multiple life insurance policies. These situations are intended as examples and are not designed to serve as direct advice. Always seek out professional assistance from an experienced financial advisor 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 the 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 getting married 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 actually cost less than before. 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. Life insurance on the other hand tends to move in the opposite direction, increasing as one grows older.
For this reason, it may be best to establish a plan at a younger age. Consider your current expenses to determine whether this will be necessary. You’ll also want to keep in mind future family expenses such as college tuition for your children or anticipated retirement expenses for your spouse.
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.
Multiple plans may provide more coverage, but require more record keeping and tracking. Be sure to establish proper information to track your new and existing policies (this goes for other types of insurance in addition to life insurance) and communicate this information, as well as any updates, with your loved ones and your legal/financial representative. According to the National Association of Insurance Commissioners, over one billion dollars of life insurance benefits goes unclaimed because beneficiaries are unable to locate their loved one’s policy, or in some cases aren’t even aware that they have been named as a beneficiary.
Whether you need more than one insurance policy will depend on your unique financial and personal situation. Be sure to reach out to an insurance professional or financial advisor before moving forward to determine what amount of coverage is right for you.