Not many people know that they can purchase more than one policy. I surprise clients almost every time when my recommendations include more than one policy and/or policy type, often due to their varying coverage needs. There are policies which better match specific needs than others. By layering your policies, you may be able to lower your monthly costs, and avoid being over-insured.
While calculating your insurance needs with your agent, you probably noticed a lot of the categories were temporary, such as education, child care, and home mortgage. Aside from future mortgage refinances, it would be pretty easy to estimate when your coverage needs for these categories would end.
Other categories, such as income replacement/supplement or final expense costs, relate to coverage needs that are more permanent. It’s hard to feel comfortable with coverage expiration dates on these categories because it really depends on the individual.
The goal for temporary coverage is typically to eliminate financial risk during the most vulnerable time–the payoff period. When it comes to permanent coverage, the goal is usually to make sure it pays out no matter what age you live to.
Each individual’s financial situation has varying levels of liabilities, factors, compensating assets, etc. Your life insurance portfolio should be custom-tailored to fit your personal needs. Because different types of solutions accomplish different types of goals sometimes you may find that layering your policies best addresses your goals.
Depending on where your coverage needs are, you may even choose to split up your term coverage.
Here’s an example of layering term life insurance coverage:
Your coverage needs may include ensuring that if you are not there, your 3 children will still have their education paid for, and your home mortgage will not become a burden for the surviving family members. What if your children will be finished with college in the next 10 years, and your mortgage will be paid off in 30 years? Do you need to carry a 30 year term to cover both?
The solution: splitting up your term life insurance coverage. By layering a 10 year and a 30 year term policy, you may bring your costs down, while accomplishing the same goal as having one longer-term policy to cover both needs.
In summary, there is no limit to how many life insurance policies you can have. The most important thing is that your plan helps you achieve your coverage goals. However, be careful with having too many active policies at one time, as it may be very hard to keep track of all of their details.