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Ask Dave

Can You Have More Than One Term Life Policy?

Chad asks if you can have more than one life insurance policy. Is there ever a reason to do this?

QUESTION: Chad on Twitter asks if you can have more than one life insurance policy. Is there ever a reason to do this?

ANSWER: Sure. You can have more than one. There are several reasons you might do this. One is that—like in my case—I have a lot of insurance regarding our business, our estate plan, and those kinds of things, and I’ve reached the limits, in some cases, that a company will write on me. They won’t write but so many millions on one person from one company, so I go to another company to do that, so that’s one reason to do it.

Another reason people do it is so that they feel more secure that if the one policy that they have goes bad—if that company goes bad—then they’ve still got the other policies in place. That’s not a real good reason because most of the companies you’re going to buy from now are financially stable and/or have insurance to back them up with the state and that kind of thing, so that’s usually not the issue.

The only problem with it is it just creates more complication for your life in that you’ve got two checks to write for the same amount of insurance rather than one check, and you do pick up … each life insurance policy has a policy fee—an annual policy fee—plus so much per thousand. Generally speaking, all things being equal, it’ll be cheaper to have one policy that totals your $600,000 or $1 million or whatever coverage you’ve got versus three that do that because those annual policy fees will get you.

Most people don’t have more than one because it does cost you a little bit more in most cases, and it’s a little bit more complicated to keep up with. But there’s no prohibition with it—nothing keeping you from doing that.