It’s easy to see the importance of having adequate life insurance cover in place to ensure your loved ones have financial stability if the worst were to happen to you.
The thing most people don’t realise, is that unlike most other forms of insurance, it is perfectly legal to have more than one life insurance policy in place.
Having multiple policies in place simultaneously, not only provides you with more cover, but also means you can leverage the benefits of different policy types to suit your needs.
For example, decreasing term life insurance provides your loved ones with a lump sum pay out if the worst were to happen to you.
However, unlike level term life insurance, the value of this lump sum reduces over time, making it the cheapest form of life insurance.
As a result, this type of life insurance is ideal for covering a repayment mortgage as it can be set to decline at the same rate as your outstanding balance.
But it may not be suitable for covering costs which don’t diminish over time, such as living costs, an inheritance, or the cost of your funeral.
These costs are more suitably covered with level term life insurance, where the pay-out amount remains the same throughout the term of the policy.
However, the cost of level term life insurance tends to be more expensive as a result.
Arranging enough cover to protect your mortgage and other costs with level term life insurance could become costly.
But, take out two policies side by side, a decreasing term policy to cover your mortgage and a level term one to cover other costs, you may find you save yourself a few precious pennies and have the cover most suited to the aspects you are looking to protect.
The biggest downfall with life insurance when used to cover daily living costs is the need for meticulous budgeting by your loved ones, to ensure they do not run out of funds before dependants become financially independent.
This in itself can become an added source of stress at an already distressful time.
Family income benefit, a lesser known form of life insurance, provides your loved ones with on-going tax free monthly pay out for the remaining term of the policy.
Again, this tends to be a relatively cheap form of life insurance as the months a pay-out will be made will decrease throughout the life of the policy.
This type of life insurance is ideal for replacing a lost salary and for funding daily living costs.
Protect all aspects of your life with multiple policies
You can see where I am going with this. By implementing simultaneous life insurance policies, you can fully protect the future financial stability of those most important to you.
For example, a decreasing term policy for the mortgage, a level term policy for an inheritance and funeral costs and a family income benefit policy to provide support on a day to day basis.
Of course, the number of policies you have in place will be dependent on both the number of aspects within your life you are looking to protect and the budget you have to make monthly payments.
Whilst the cost of your premiums will be influenced by the type of policy you choose, it will also be affected by your age, smoking status, health and lifestyle.
Meaning that for those who are older, in poor health or smoke, obtaining multiple life insurance policies may not be financially feasible.
In this instance, it is important to consider what aspects of your passing are likely to cause the most financial disruption and arrange cover to protect loved ones against this.
Compare quotes to secure the best deal
The cost of any life insurance policy will vary significantly between insurers; therefore, it is essential to compare multiple quotes when arranging cover.
This can either be done independently, using a price comparison website or an FCA registered independent broker (little secret, their services are completely free).
It’s important to be aware that when arranging multiple life insurance policies, they do not have to all be with the same insurer, nor arranged at the same time.
This provides you the opportunity to arrange cover for the most important aspects of your life, but to add subsequent levels of cover at a later date when required, or when you have more disposable budget to do so.
As with all forms of life insurance, if a policy is cancelled or it expires before your passing, no pay out will be made and all premiums paid in will be lost.
Again, this is on a policy by policy basis. Cancelling one policy will not affect the other policies you have in place.
In order to claim on all of your policies, it is important to ensure that your loved ones have access to details of all the protection you have in place.
This can become trickier when you have cover with multiple insurers.
Therefore, to ensure your loved ones receive maximum benefit from your selfless investment, it is important to keep track of all of the cover you have in place.
So, as you can see there is a vast array of reasons why having multiple life insurance policies in place can be of benefit.
Whether this be to provide your loved ones with multiple layers of protection or to simply avoid paying for a type of life insurance you don’t require.
Infographic: Implementing Multiple Life Insurance Policies