Should You Have More Than One Life Policy?
Did you know that September is Life Insurance Awareness Month? And though life insurance is important to discuss at any time of the year, some features of life insurance go beyond standard conversations.
For example, did you know that you can have multiple life insurance policies at once? One policy is often considered enough, but that may not always be the case. Below, we outline situations that may call for multiple life insurance policies.
Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges, and there may also be income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
When Would You Purchase Multiple Life Insurance Policies?
Life insurance is designed to provide supplemental income to beneficiaries in the unfortunate event of a plan holder’s passing. However, a single policy may not be enough to cover all of the expenses of a family.
Purchasing a second life insurance policy is an option for those who would like additional coverage. Greater protection for loved ones is the largest benefit of this approach, although paying for multiple policies can be expensive. Here are some situations that may call for the purchase of a second life insurance policy.
Lifestyle Changes
The birth of a child, changes in employment, or a new relationship are all examples of life changes we may think of when considering greater coverage. But another factor to consider is personal lifestyle changes, especially those that involve your health. If you’ve made healthy changes, then a new policy may cost less than before. As situations change, so do the monetary needs of those around you. Consider this when examining your life insurance needs.1
Age
According to the U.S. Federal Reserve, average family income decreases as the head of household reaches retirement age. However, the cost of life insurance tends to move in the opposite direction, increasing as one grows older.2,3
For this reason, it may be best to establish a plan at a younger age. Consider your current expenses to determine whether this will be necessary.
Asset Accrual
Some financial goals will require long-term payment plans. Assets like cars and homes can take a while to pay off, increasing your monthly expenses by a specific amount for a given period.
Depending on your situation, a second life insurance policy can help account for these added expenses, providing additional income for a period to help offset the added cost until assets are paid off.
Often, these policies are set to different terms, and this strategy is typically referred to as laddering term life insurance.2
Tracking Policies
Multiple plans may provide more coverage, but be sure to keep track of each policy and its costs. Premiums alone are expensive, yet tens of millions of dollars in life insurance payouts go unclaimed every year. Be sure you have the right information to track any new and existing policies.4
Whether you need more than one insurance policy will depend on your unique financial and personal situation. Be sure to reach out to an insurance professional to determine what coverage is right for you.
1. LegalandGenera.com, 2022
2. TheBalance.com, September 29, 2021
3. Statista.com, 2022
4. PolicyGenius.com, December 1, 2021
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.
