Chances are you don't spend much time thinking about your life insurance policy. Maybe you purchased a policy after seeing a friend struggle to pay for a parent's funeral. Or maybe you took the plunge after taking the big walk down the aisle — or bringing your first child home. Whatever the reason, life insurance could help you protect your loved ones from financial distress when you're no longer here.
But is one life insurance policy enough for your needs? And can you even have multiple life insurance policies? Explore your options and learn more about the reasons for having more than one policy.
The Power of Many
It's possible to have more than one life insurance policy. Some people purchase multiple life insurance policies for access to more coverage should they or their dependents ever need it. Also, additional life insurance policies could help make up any shortfall in cash if you ever fell ill.
Most people have employer-sponsored life insurance, but this type of policy only lasts for the duration of employment and is usually equivalent to one year's salary. A policy of that size might not be enough to cover household expenses or even funeral costs. An additional life insurance policy could help provide greater coverage — and the funds to offer financial support to loved ones.
You might also consider purchasing an additional life insurance policy when faced with a health crisis or after having additional children. The addition of a policy could help provide extra coverage should your family need financial support.
What Are Your Options?
There are many types of life insurance policies available, and all of them could make sense for people in a variety of life stages.
Some of the most common types of life insurance include:
- Term life: Term life insurance policies only provide coverage for a specific period — often 10, 15, 20 or 30 years. Term life is generally considered the most affordable type of life insurance. It pays its face value if the insured passes away during the term of coverage, as long as the premiums are paid. This provides protection for a definite but limited period. If the policyholder survives the term, the policy will terminate unless it's renewable or convertible.
- Whole life: Whole life insurance provides protection for the policyholder's entire lifetime. A whole life policy never has to be renewed or converted, as long as the premiums are paid. It also accumulates a cash value.
- Universal life: Universal life insurance provides a death benefit the policy owner may choose to increase — after passing a physical exam — or decrease. A universal life policyholder can also adjust their premium amount and payment schedule without providing prior notice to the insurance company. However, it is important to note that the policy owner will still need to have enough cash value to cover monthly charges or he or she may be required to make additional payments to keep the policy in force. The amount of the death benefit will be adjusted in response to any change in premiums, however. Universal life policyholders can pay more in some years and less in other years, according to their changing financial needs. Such policies also earn a cash value.
Buying your own life insurance policy can be an important decision, as most employers offer life insurance only for the duration of employment. Once you stop working for them, you're no longer covered under their plan. This could leave you and your loved ones unprotected should something happen to you.
Multiple life insurance policies could help provide extra coverage in the event you're not covered by your employer. You might also consider reviewing your current policy and speaking with a financial representative, who could help you decide whether you need more or less coverage whenever you encounter any major life changes.
It's better to be prepared in the event you're no longer able to provide the support your family needs. The peace of mind you secure through wise planning can be worth its weight in gold. Make sure you do your research beforehand — and check out all the options available to you.