How many life insurance policies can you have?
For most types of insurance, having more than one policy is counter-productive and a waste of money. In the case of life insurance, though, taking out more than one policy can sometimes be beneficial.
In contrast to things like car insurance or travel insurance, taking out more than one life insurance policy could actually be the right option for you and your circumstances. In theory, there is no limit to how many policies you have, although there are some restrictions.
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Why you might need more than one life insurance policy
There are lots of reasons why you might consider having more than one life insurance policy, including:
- Making sure your family are protected in the event of your death
- Covering a big loan e.g. a mortgage, so it can be paid in the event of your death
- Protecting a business partner, so the business can continue running in the event of your death
- Cover any potential inheritance tax liabilities in the event of your death
When you apply for a life insurance policy, you will be asked if you already have any policies in place. It doesn't necessarily matter how many policies you have - the key factor is how much cover you have in place.
You can't simply insure yourself for millions of pounds without good reason, as this would expose the company holding your policies to too high a risk. When you buy a life insurance policy, the insurance company will in turn use a reinsurance company to manage the risk. So even if you do not disclose how many policies you already have to the life insurance company, when they pass it on to the reinsurer they will be able to check how much is liable to be paid out in the event of your death and see how many policies they currently reinsurer in your name.
If they find policies that you did not disclose at the application stage then it is likely they will question your motives for withholding that information and reject your policy. So it's imperative that your are honest and disclose all the life insurance policies you have.
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New life insurance policies for changing circumstances
Over time your personal circumstances and requirements are likely to change, particularly after big life events such as:
- Getting married
- Getting divorced
- Having more children or grandchildren
- Taking on a larger mortgage, or extending your mortgage term
- Changing jobs
- Change in health - improving or declining
Changing circumstances such as these can alter the way you look at life and your finances, and lead you to review the life insurance and protection policies you already have to make sure they are fit for purpose and suitable for your new requirements.
Having children, for instance, is a prime example of when you may want to review what your current life insurance policy offers and to make sure you are covered for the cost of raising children (childcare, University fees etc.) in the event of your death.
If you need to review your current life insurance provision, follow our quick guide below to make sure you get the best deal for your circumstances...
Get in touch with your current insurer
As a first step, you should speak to your current life insurance company. Unlike products like car insurance and home insurance, it's not necessarily a good idea to switch life insurance regularly to take advantage of cheaper premiums.
That is because your increasing age and declining heath can have a big impact on the cost of life insurance, meaning as time goes by you may not have access to cheaper premiums. If your circumstances have changed then you should check with them to see if you can increase the level of cover you have, as the extra premium cost might be less than the additional cost of taking out a new policy.
As well as extending the level of cover (i.e. the total payout your loved ones receive), it could also be possible to extend the length of your existing policy. For example, if you took out a term life insurance policy for 25 years then you may be able to increase that to 30 years to cover an extended mortgage term.
Compare new life insurance policies
After you've discussed your position with your current life insurance provider, it's then worth shopping around and comparing policies to see your other options.
Depending on your circumstances, it may be better to keep your existing life insurance policy as it is and take out an extra policy to meet your new requirements.
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Consider cancelling your policy and getting a new one
This is also an option, but remember: it's likely that a policy you took out when you were younger would be on cheaper terms than one you arrange when you are older.
However, if you have given up smoking, drinking, lost weight or have had a long remission from a serious illness, then cancelling an old policy that was priced based on your previous condition and arranging a new one could be the cost-effective option.
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