Life insurance is one of the most reliable tools for financial protection. It ensures that in the unfortunate event of the policyholder’s death, the dependents are supported financially. But one question that often arises is — can you have more than one life insurance policy? The answer is yes. In fact, for many individuals, holding multiple policies is not just permissible but often advisable, depending on life stage, financial responsibilities, and long-term goals.
Whether you want to increase your total coverage or diversify benefits through different types of life insurance, multiple policies can offer tailored solutions for a wide range of needs. However, before doing so, it is important to understand how this works and what to consider when opting for more than one life insurance policy.
Is it legal to hold multiple life insurance policies?
Yes, it is completely legal to have more than one life insurance policy. There is no restriction on the number of policies an individual can hold, provided the total sum assured is justified by the individual’s income and insurability limits set by insurance companies.
When applying for an additional policy, the insurer typically asks if the applicant holds any existing life insurance. This is not to deny coverage, but to assess the total risk exposure and ensure that the combined coverage is within a financially reasonable limit.
Why do people opt for multiple life insurance policies?
1. Different goals for different policies
One policy may be taken to cover a home loan, another to secure a child’s education, and a third to provide for retirement or family protection. Segmenting insurance coverage this way offers better planning and clarity.
2. Staggered coverage
As financial responsibilities evolve, people may buy policies at different life stages. Having a 20-year term plan in one’s 30s and another in their 40s ensures coverage across different periods without depending solely on one policy.
3. Policy diversification
Different types of life insurance offer different benefits. A term plan provides high coverage at low cost, while an endowment plan or a Unit Linked Insurance Plan (ULIP) offers savings or investment benefits. Combining different policies allows individuals to enjoy both protection and returns.
4. Flexibility in claims and maturity
Multiple policies mean that if one policy expires or is surrendered, the others still offer protection. It also allows for maturity benefits to be received at different intervals, which can aid financial planning.
What are the types of life insurance policies to consider?
Before holding multiple policies, it is helpful to understand the main types of life insurance:
- Term insurance: Offers pure life cover for a specific term with no maturity benefit (unless opted with return of premium).
- Endowment plans: Provide life cover along with a savings component and maturity benefit.
- ULIPs (Unit Linked Insurance Plans): Combine insurance with market-linked investments.
- Whole life insurance: Covers the policyholder for their entire life, usually up to 99 or 100 years.
- Money-back plans: Offer periodic payouts during the policy term in addition to death benefits.
A strategic mix of these policies can address short-term protection needs and long-term wealth accumulation goals.
Points to keep in mind when holding multiple policies
1. Honest disclosure is crucial
Always declare existing life insurance policies when applying for a new one. Insurance companies assess the total risk based on your declared income and existing cover. Withholding this information can result in claim rejection later.
2. Choose coverage wisely
Do not buy multiple policies impulsively. Instead, assess your overall coverage needs based on income, liabilities, number of dependents, and financial goals. Aim for coverage that is neither too low nor unrealistically high.
3. Manage premium payments
Multiple policies mean multiple premium due dates. Missing payments can lead to policy lapse. It is advisable to automate payments or set reminders and maintain a financial buffer to manage all premiums comfortably.
4. Keep documentation organised
Ensure that all policy documents are stored securely and that nominees are aware of each policy’s details. Clearly communicate the existence of multiple policies to family members to avoid confusion at the time of claim.
5. Consider nominee designation
Each policy can have a different nominee or beneficiary. This allows for more granular estate planning, where different family members receive benefits based on individual needs.
Final thoughts
Yes, you can have more than one life insurance policy, and in many cases, it can be a smart move. Holding multiple policies allows you to customise coverage for different goals, ensure continuous protection over the years, and enjoy the combined benefits of various types of life insurance.
However, this approach requires careful planning, full disclosure, and disciplined premium management. When done right, having multiple policies can significantly strengthen your financial strategy and provide comprehensive security to your loved ones, regardless of life’s uncertainties.