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Can You Own More than One Life Insurance Policy?

Written by Aaron Pinkston, Fri, Feb 19 2010

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I recently saw someone ask the question if they could own more than one life insurance policy. I guess it makes sense there might be some regulation or competitive stance against that.

Not only is it possible to own more than one life insurance policy, in some cases, it may be the wise thing to do.

Suppose you are adding another member to your family or refinancing your house. In the process, you realize you need more life insurance. Sometimes it is easier and cheaper just to add to the insurance you already have, but in some cases, keeping what you have and adding to it makes more sense.

Theoretically, there is no limit to how many life insurance policies you can have. However, you may have a limit on the amount of life insurance you can have.

When you apply for a new life insurance policy, underwriters consider how much total life insurance you already have and the amount you are applying for. They want to know that you are not over-insuring yourself with the new policy. Believe it or not, they already know what the upper limit of the amount of insurance they will issue to you, depending on the financial justification for each policy. As long as the total amount of life insurance you have and are applying for is under this limit, the underwriter should have no problems approving the financial portion of your application.

So how much life insurance can I get?

Like all things, this financial limit may be different from different companies. It is generally 5 – 15 times your income or 1.5 – 5 times your assets, which ever is greater (and depending on the purpose). But the total amount of life insurance an underwriter approves could vary significantly depending on the reason you need more life insurance.

For instance, if you are a retired business owner who needs life insurance to help offset the high taxes your estate has to pay at death, expect a total limit of approximately 2 – 3 times your assets. If you just got married and work as an engineer, expect total limits closer to 10 – 15 times your income, even if your net worth is $0.

How much life insurance for stay-at-home moms?

The rules for stay-at-home spouses and partners are a little different. Frankly, they are hard to find. From what I gather talking with underwriters in the past is they will match your coverage amount to your income-earning partner up to around $750,000 or $1,000,000. But again, it’s hard to say because this information isn’t as easy to get a hold of and it differs with each company.

Most importantly, remember financial underwriting of life insurance does not affect the policies you already own, only ones you are applying for. Chances are if you see a legitimate need for the coverage, there is an easy way to convince the underwriter to approve what you are looking for. Your agent is usually a good resource to help you with this.

While you can’t have too many life insurance policies, you can have too much life insurance. If you want to get custom quotes from multiple agents for your next life policy, Clarifinancial is the only hassle-free way to do it.