Financial planning isn't a "one and done" activity. Your financial needs and goals will change over the course of your life, along with changes in your personal life. Life insurance is part of that picture for most of your life, increasing with your responsibilities and then decreasing as you accumulate assets. There might be times when you need to purchase multiple policies, for specific needs. Fortunately, there are no legal limits on how many policies you own.
It might sound strange to divide your coverage between multiple policies, but it's not at all uncommon. For example, you might have a small whole-life policy dating back to your infancy, a large term policy to provide your main coverage, a smaller policy included in your mortgage payment, and balance insurance on several of your credit cards. Alternatively you might have a universal life policy for its lifelong coverage and investment options, and term coverage to protect your family until the kids are grown and educated.
Insurers generally aren't concerned with how many policies you own, but how much total coverage you've purchased. As you add more coverage with any one insurer, the company will begin to examine your health and physical condition more closely. For example, the same company that issued $250,000 in term coverage based on the information on your application might require a full physical workup from your doctor before it will issue $1 million in coverage. Ethical brokers will be reluctant to sell you more coverage than you can afford, and insurers might question your motives if you're trying to buy quantities of insurance that are disproportionate to your needs.
Pros and Cons
If you have a need for additional coverage, there are advantages and disadvantages to purchasing multiple policies. If you're concerned about privacy or are just reluctant to have a full physical, dividing your purchase among insurers can minimize scrutiny of your health. It also gives you maximum flexibility to tailor each policy to your needs, by buying the best product for each purpose. One downside is that underwriting costs represent a large part of each policy's premium, and buying multiple small policies costs more than choosing a single large policy. Further, if you're dodging scrutiny because you're aware of a health problem, getting caught can mean invalidation of your policies.
If you're adding and dropping policies as needed to meet specific needs, most insurers offer the option of purchasing term insurance riders for your existing policy. These are small additional policies that piggyback on your main coverage. They're usually cheaper than standalone policies, because the insurer already did the underwriting when your main policy was issued. If your income has increased and you'd like to add some permanent coverage to your portfolio, you can usually convert part of your term policy to permanent insurance just by making the request. This has the advantage of not requiring further health checks, so if you've developed high blood pressure or a heart condition, it can be your only chance for a permanent policy.
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