How Many Life Insurance Policies Can I Have?

By Vicki Coleman

There’s no law that prevents you from having more than one life insurance policy. But the question is, why would you?

You wouldn’t insure your car twice or even your house for that matter. However, there are circumstances where you might want to double up on life cover.

For most people in the UK, they’re happy to go without any kind of life cover, let alone a combination of different life insurance arrangements.

We make no apologies for continuing to highlight that nearly two-thirds (63%) of Brits do not hold a life insurance policy[1].

For some people, it makes financial sense for them not to take out a policy at this point in their lives. However, for most people – those of us with dependents – there’s a strong argument to have some protection in place for that worst-case scenario, and that best option might be to hold multiple policies.

Let’s look at some circumstances where it might benefit you to have additional cover:

1.       You were unable to work due to illness or injury

Life insurance covers you in the event of your death, providing your family with a lump sum that will support them financially in your absence. But a life insurance policy doesn’t automatically provide any assurance in the event of a disruption to your family income through illness or injury.

That’s where income protection and critical illness cover come into their own. They both do what they say on the tin:

·       Income protection: designed to help you continue to meet your regular financial commitments if you are unable to work for an extended period of time. It provides a monthly income, tax-free, if you are forced to stop work for health reasons.

·       Critical illness: provides a tax-free lump-sum payment if you are diagnosed with a covered condition. The money can be used to support you and your loved ones if you can’t earn a living through treatment and recovery.

You might also want to consider private medical insurance which helps you get access to the right treatment you need, when you need it i.e., without NHS delays.

2.       You want to increase your cover

If you were ahead of the game and took out life insurance in your younger years (you can come up with your own definition of ‘younger years’ here…), there’s a good chance your circumstances might’ve changed in the interim period.

Perhaps you’ve had (more) children or upsized your property (and mortgage). That existing policy might not cut it anymore. Some insurance providers will allow you to increase your cover. But it’s often the case that they don’t like to offer this as an option – not without a big hike in premiums to compensate.

It might make more sense to ‘top up’ your existing policy with a new policy instead. Sometimes two sets of premiums are cheaper than one.

3.       You want a separate policy from your partner

A joint policy can make a lot of financial sense as it’s usually cheaper than two single policies. But that’s because it'll pay out only once, usually after the first partner dies.

Once the policy has paid out, it automatically expires, leaving the surviving partner uninsured. That’s not necessarily an issue. It depends if the surviving partner has any dependents.

If you have children together, the surviving partner will need to take out a new policy to ensure that they are going to be left with a lump sum.

However, if you're older, it can be costly to get a new policy – particularly if you've developed any medical conditions, all of which you will need to make the insurer aware of.

By both taking out separate policies, you can guard against such price hikes. But you’ll pay more whilst the cover is active.

There are pros and cons to both options; only you can decide what’s best for you as a couple. Our article, which provides a balanced look at single vs joint policies, is designed to help you make your choice.

4.       Your death in service benefit doesn’t provide enough cover

You might have decided not to bother with life insurance because your current employer offers you a death in service benefit. This is their promise to you that they will pay a lump sum should you die while on their payroll.

The amount a nominated beneficiary would be paid will likely be stated somewhere in your contract, but it’s usually between three to five times your current annual salary. Having done a bit of quick maths with your current salary, you can work out how much your family would get.

It’s unlikely to be enough to cover an outstanding mortgage debt in full, although it obviously depends on where you are with your mortgage repayments.

To bring your level of cover up to the desired amount, you might want to combine your death in service benefit with life insurance. You can always take off the money from your death in service benefit which should help to lower your life insurance premiums.

It just means that you’ll be doubly protected – which means more money for your loved ones if you die.

5.       You want to protect your beneficiaries from inheritance tax

Taking out a second life insurance policy written in ‘trust’ could keep any pay-out separate from your estate.

Your estate is the total sum of all your money, property and possessions when you die.  Writing life insurance in trust means the money paid out from your policy should not be considered part of your estate and therefore your payout won’t count towards the inheritance tax threshold (currently set at £325,000 for one person).

However, estate planning can be complex and it’s well worth speaking to an accountant or tax advisor for help before you make any decisions about having a second life insurance policy written in trust.

Get some life insurance quotes

What you don’t need to think twice about though is generating some life insurance quotes – you have nothing to lose from it!

At QuoteSearch, we’re happy to generate as many quotes as you need so that you can make your mind up. We don’t have any favourite suppliers – the quotes that you see are comprehensive and competitive.

So, don’t be shy in requesting quotes for different types of cover – that’s what our experts are paid to do!

To compare your free life insurance quotes from leading providers, click here.

[1] https://www.moneymarketing.co.uk/news/majority-of-brits-do-not-hold-life-insurance-policy-study-finds/#:\~:text=The majority (63%25) of,and those that purchase cover.