With different needs there are different solutions. Can you own multiple term life insurance policies? The answer is Yes. Why would you want to do this? There are a few reasons…
The most frequent reason is trying to match the duration of the need you are covering with the length of the term renewal period. For example, if you just had a baby you may look at the next 20 years as a time when financial need would be very high if something happened to you unexpectedly. You may also have a student loan (they hang around forever with the cost of post secondary school these days) that is set to be paid off in 8 years. By matching up the duration of the needs you may find that the most cost effective way of covering the needs would be a 10 year term life insurance plan for the student loan and a 20 year term life insurance plan to protect your family income. By splitting up the coverage it may allow you to more easily keep track of what covers what and deal accordingly as coverage isn’t needed any longer. The cost of a term life insurance policy increases as the length of the term increases. For example, a 20 year term policy costs more than a 10 year term policy. A 30 year term policy costs more than a 20 year term policy. Correctly matching the length of the term with how long you require the coverage for may prove to reduce your costs which would be a reason for owning more than one term life insurance policy.
Another reason to own multiple term life insurance policies can be the need for specific amounts of life insurance coverage payable to specific beneficiaries. More and more often we are seeing separation agreements and child support agreements where there is a requirement that there is a specific amount of coverage that needs to be maintained for a set number of years. If this is the case it can sometimes be ‘cleaner’ to have a policy dedicated to this need. It allows for it to be handled separately from any of your other policies and can have the exact values that you need payable to specific beneficiaries without mixing with any of your other needs.
Premium dollars should be considered as well. Sometimes life changes and those changes can result in you needing more life insurance. You need to consider if it makes sense premium-wise to replace an existing policy with a new one that meets all of the new needs or are you better off keeping current coverage undisturbed and adding a new policy in to meet the changing need? Life insurance policies are priced based on your age and health at the time that you apply so replacing an existing policy almost always means that the premiums will be higher than your old policy. This is added to by the fact that there are benefits in an existing policy that may no longer be available or exclusions in old policies that may have expired. Cancelling a policy to replace with a new one is always something that needs to have extra discussion around these reasons.
The bottom line is that yes, it can make sense to have multiple term policies (but not always). Varying needs can be met using this approach in a clean manner that protects you and the people you care about.
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