Are you thinking about getting multiple life insurance policies? Or are you wondering whether you should condense multiple existing policies into a single one? Having multiple life insurance policies can be confusing, but also beneficial. Here's what you need to know.
There Are Different Types of Insurance Policies
Life insurance policies come in two major types: term life and whole life. Term life policies are less expensive but they "term out" after a certain amount of time. Whole life policies are more expensive, but they exist throughout your lifetime. You could want to maintain both types of policy, with your term life adding to the potential payout while active, and your whole life operating as a "backup" plan.
You Often Have Different Insurance Policy Offers
Employers, banks, and even credit cards can offer a small amount of life insurance. Often, these policies are little cost to you. There's no harm in getting an additional $10,000 policy here or $10,000 policy there for just a few dollars a year; this can become beneficial for end-of-life and funeral expenses.
Each Policy Can Have a Different Beneficiary
To avoid any confusion, you can set the beneficiary of each life insurance policy to someone different. Consider a situation in which you have $200,000 in life insurance going to your spouse. However, you and your spouse have a child. Rather than adding on to the benefits and adjusting your original policy, you can instead purchase an additional $200,000 in coverage in the name of your child. This ensures that everything is covered as it should be in the simplest way.
You Can Have As Many Life Insurance Policies As You Want
You can technically have dozens of life insurance policies if you so desire, but do keep in mind that your beneficiaries are going to need to know everything they can about their policies in order to collect. Life insurance policies don't generally go through the estate. This is good, because they won't be used to pay off your debts, but also bad, because they can fall through the cracks. Keep all your life insurance information with your estate plan.
Brokers May Be Concerned About Your Total Coverage
Finally, a broker usually will look at your total coverage amount and may decline to provide you more than is feasible for your income. If you're currently paying $1,000 in life insurance premiums a month, an insurance company may have questions. Keep it reasonable, however, and there's no set upper limit.
There's no reason not to maintain multiple life insurance policies if you can. To find out more about this, you can contact an insurance company like Reinhardt's Insurance Agency and walk them through your existing coverage.