Do You Have Enough Life Insurance?

“You need life insurance, if your death would hurt anyone financially. For many people, one policy is enough.  However, for some, two or more make sense. Your needs should drive the number and type of policies you buy.”

Nerd Wallet’s recent article asks, “Can You Have More Than One Life Insurance Policy?” So, just how many can you buy?

The article explains that you can own several policies from different companies. However, when you apply, insurance companies will inquire about your existing coverage to make certain that the amount you want is reasonable.

It’s not uncommon to purchase a lot of coverage without any problems. An insurance agent will usually ask why you need a great amount of coverage, if the total coverage would exceed 20 to 30 times your income.

A frequent need to purchase life insurance coverage is to replace income in the event that the main income-earner passes away prematurely. The answer to this is term life insurance. This policy will cover you for a certain period, like 10, 20, or 30 years. Hopefully, when the term expires, you won’t require that life insurance, because your debts are paid, and you’ve finished raising your family.

Rather than purchasing one large policy, you could get multiple policies of different lengths and amounts to match your family’s needs over time. As an example, instead of getting a single 30-year $1 million policy, you could buy three policies: a 10-year for $500,000; a 20-year, $300,000 policy, and a 30-year, $200,000 policy. This type of “laddering” strategy can save money, and it can work, if coverage needs decrease. This way, you can predict them accurately. At least, that’s the theory.

Note: if you decide to buy just a single policy and discover later that you don’t need as much life insurance coverage, most carriers will let you lower the coverage and pay less.

There are also other reasons to buy coverage, besides replacing income. These can include small-business owner needs, long-term care and estate planning.

Talk to an experienced estate planning attorney about how life insurance can fit in your plans.

Reference: Nerd Wallet (September 17, 2018) “Can You Have More Than One Life Insurance Policy?”