While there are no limits to the number of life insurance policies you can have, there’s a maximum to the total dollar amount of life insurance coverage you can have in place at one time. Most people can qualify for a maximum amount between 10 and 30 times their annual income, depending on their age.
Because your life circumstances and financial responsibilities can change over the course of your lifetime, one life insurance policy might not be the best way to set up your life insurance coverage. Instead, you can put different policies in place at different times to accommodate your budget, or to protect you through different life stages.
Why would you need multiple life insurance policies?
The main reason to buy life insurance in the first place is to provide a financial safety net for your loved ones in the event of your death. But as your family grows and your financial obligations evolve, getting multiple policies may be the best way to meet that goal.
Here are some scenarios where shopping for an additional policy may make sense.
You need to cover a new major life event, like getting married or buying a house.
You want to supplement a group life insurance policy provided by your employer.
You want to complement a whole life insurance with an affordable term life policy.
You want to help pay for your final expenses, like your funeral.
You want to leave an inheritance to your loved ones.
You have a small business you need to protect, in addition to protecting your family.
You have a change in income, whether by getting a raise or taking a new job.
You want to ladder multiple term life policies to address different financial needs.
1. You need to cover new major life events
If you experience a major life change that impacts your finances, it makes sense to get more life insurance to protect your beneficiaries after your death.
We recommend re-evaluating your coverage needs when:
Your income changes
If you need more coverage, you can either buy an additional life insurance policy or replace your current policy with another that provides a larger death benefit. There’s no financial cost for replacing a policy.
Depending on how much more coverage you need, buying a supplemental policy may be the cheapest option. You can also buy a new policy with a term length tailored to your life event, like a policy that lasts as long as your mortgage, or one that will last until your children grow up.
The best way to pick the most cost-effective option for you is to work with an independent broker. At Policygenius, we can walk you through your choices for increasing your life insurance coverage, whether that’s replacing your old policy or buying an additional one.
2. You want to supplement your employer’s group life insurance policy
Getting group life insurance through your employer is a great benefit because it usually comes at no cost to you. However, employers often offer less coverage than you need.
While your employer might offer you one or two times your annual salary, most people need life insurance that’s 10 to 15 times their income.
Another reason to supplement your group coverage is that it will typically expire if you leave your job. But changing jobs won’t have any effect on your personal life insurance policy.
3. You want to supplement a whole life insurance policy
If you have a whole life insurance policy, you may want to supplement it with a term life insurance policy because it can be expensive to have a permanent life insurance policy big enough to cover all your needs.
As we mentioned above, coverage needs can change over time, too. “A client might need a larger amount of coverage for the next 10 years until children are out of college,” says Allan Phillips, a certified financial planner, life insurance expert, and founder of Tree Street Advisory. “Needs for a lesser amount might persist after that.”
In a case like this, if you already have a whole life policy worth $250,000, you may decide to take out an additional 20-year term life policy worth $750,000 while your children are growing up. After 20 years, your children will be financially independent, and the term life policy will expire. This way, having multiple policies will cover your financial needs at different stages of your life.
Learn more about the differences between term life and whole life insurance
4. You want to help finance your final expenses
In 2022, the average cost of a funeral ranged from $7,000 to $10,000. If you’re worried about this financial burden falling on your loved ones, final expense insurance may be a good policy to consider adding on top of any existing policy you may already have.
Final expense insurance doesn’t expire and is designed to cover end-of-life expenses, like a funeral or medical bills — coverage amounts are usually low, between $5,000 and $50,000.
If you’re nearing the end of your life and fear that your existing insurance won’t be enough to pay for end-of-life costs, supplementing your current coverage with a final expense policy could be the best way to provide for your family.
5. You want to leave an inheritance to your loved ones
Wanting to take care of your spouse, children, or family after your death is often the primary reason people choose to get one (or more) life insurance policies.
If your primary policy doesn’t offer enough coverage to protect your loved ones in the event something happens to you, it may be a good idea to get a policy that will.
If you’ve already saved up or have coverage for end-of-life expenses, the death benefit from a supplemental policy can become a nest egg for your loved ones.
If you have a large estate, an additional life policy can help your beneficiaries offset inheritance taxes.
Learn more about how to use life insurance for estate planning
6. You have a small business
If you’re a small business owner, a personal life insurance policy is especially important because you may not have typical employee benefits like a retirement account, group life insurance, or disability insurance.
If your family relies on the income that comes from your small business, the death benefit from a life insurance policy will provide financial support after your death.
To protect your business as well, you may want to consider a supplementary key person insurance policy. This is a specific type of company-owned life insurance designed to help keep a business afloat even if the owner or another important employee dies.
Learn more about life insurance for business owners
7. Your income changes
Your income has a huge impact on the amount of life insurance you need and the amount of coverage you can afford. Whether you get a raise or change jobs, any time your income changes is a good time to evaluate the amount of coverage you have.
Most financial planners advise that you have an amount of insurance equal to 10 to 15 times your income. When your income changes, your recommended amount of insurance coverage will also change.
Most of the time, it’s cheaper to increase the amount of coverage you have by getting an additional life insurance policy, rather than replacing the policy you have with a bigger one. This is because insurance is usually more costly as you age.
8. You want to ladder multiple term life insurance policies
The life insurance ladder strategy allows you to stack multiple term life policies with different term lengths and coverage amounts that expire as you pay down your debts or your financial responsibilities lessen. When you ladder policies, you can cover different life events and pay only for the coverage you need at every stage of life.
Learn more about how to use the life insurance ladder strategy
Should you set up multiple life insurance policies?
Setting up multiple life insurance policies can be a good strategy to get the coverage you need at different times in your life without overpaying or being overinsured. But make sure that you understand the pros and cons of setting up multiple policies.
Pros | Cons |
|---|---|
You can set up life insurance to meet certain needs like covering a mortgage or seeing your children through school. If you’re unable to pay your premiums, you can simply cancel one of your policies and keep some coverage in place. | Life insurance generally gets more expensive as you age, so waiting to set up coverage could cost you more money, especially if you develop an unexpected health issue. If you have multiple life insurance policies, you’ll have to keep track of multiple monthly or annual bills. |
How long should your life insurance coverage last?
Is there a limit on the amount of life insurance you can have?
You’re not limited to the number of life insurance policies you can have, but you’re limited by the total amount of coverage you can get.
Your age and annual income play a key role in determining how much coverage life insurance companies can offer you.
In general, the younger you are the higher the amount of coverage you can have, because you have more working years ahead of you and a great chance of increasing your income over time.
Age | Coverage limit |
|---|---|
Age 18 to 40 | Up to 35x your annual income |
Age 41 to 50 | Up to 25x your annual income |
Age 51 to 60 | Up to 20x your annual income |
Age 61 to 70 | Up to 10x your annual income |
Age 71 to 80 | Up to 5x your annual income |
Methodology: Coverage limits for life insurance policies offered through policycentral from Brighthouse Financial, Corebridge Financial, Legal & General America, Lincoln Financial, Prudential, Symetra, and Transamerica. Coverage limits may vary by issuer, term, coverage amount, health class, and state. Coverage limit illustration valid as of 04/01/2024
How restrictive is the limit on the total amount of life insurance you can have?
For most people working full-time, the limit to how much life insurance you can get is much higher than the amount you’ll need, unless you have a unique circumstance like a large amount of debt or owning your own business.
If you work part-time, are a homemaker, or are not working for any reason, you may run into issues with the coverage limit. Work with an independent broker who can help you if any of these scenarios apply to you or the limit on your total coverage is preventing you from getting a life insurance policy that you need.
Things you should consider when buying additional life insurance
Depending on your personal situation and coverage needs, you may have to go through the life insurance application process from scratch or provide additional information to your insurer in order to buy additional policies.
Here’s what the process might look like.
You might have to go through underwriting. This is the process during which the life insurance company assesses your insurance risk and determines how much coverage it can offer you and how much you’ll pay for it. During underwriting, you’ll have to provide information about your health, household, and finances.
You might have to take a medical exam and meet additional underwriting requirements. Depending on your age, health, and the type of policy you’re applying for, insurers might ask you to take a medical exam. And if you’re applying for a large coverage amount — for example, $5 million or $10 million — some insurance companies might request an EKG (also abbreviated ECG, standing for electrocardiogram) if you’re over the age of 50.
You might have to provide additional information about your financial situation, like your income and assets, in order to justify the need for additional coverage.
You’ll have to disclose your existing policies, so the insurance company you’re applying with knows how much coverage you already have.
Be honest and straightforward during the application process. Insurers will verify your information through the Medical Information Bureau (MIB), where insurance companies have access to compiled information from previous life, health, disability, and long-term care insurance applications.
If the insurance company finds out you lied or misrepresented yourself during the application process, it might decline your coverage or refuse to pay out to your beneficiaries if it determines you committed life insurance fraud.
If you’re not sure if having multiple life insurance policies is right for you, we can help. At Policygenius, our agents are licensed in 50 states and can help you find the right coverage for your needs at your lowest price.
