Can You Have More Than One Life Insurance Policy?

In short, yes, you can have multiple life insurance policies, but insurers may limit the total amount of coverage you can buy. This is because life insurance is primarily designed to replace your income when you die, so you might need to justify a need for more coverage.

While one policy is sufficient for most people, having two or more policies can make sense if you have various coverage goals. Your financial needs both now and in the future should drive the number and type of policies you buy.

» MORE: Who needs life insurance?

How many life insurance policies can you have?

You can own multiple life insurance policies from the same or different companies. But when you apply, insurers tend to look at any existing coverage you have to make sure the policy you’re buying won’t cause you to exceed your insurability limit. This life insurance death benefit for individual policies is typically capped at 20 to 30 times your annual income.

The insurability limit exists because life insurance is designed to replace your earning power, not to considerably increase the wealth of your beneficiaries.

» MORE: Types of life insurance

Buying multiple life insurance policies: How it works

Having more than one life insurance policy is often referred to as “laddering.” This is when you buy multiple policies to cover different needs. Term life insurance is often used for laddering as it’s cheaper than permanent life and you can buy policies lasting a specific number of years..

» MORE: How long should term life insurance last?

For example, say you’re the breadwinner and want to cover your income, your mortgage payments and your kids’ college debt. Instead of buying a $1 million life insurance policy, you could buy three term policies of different lengths and amounts to match each need:

» MORE: How much life insurance you need?

Can laddering life insurance save you money?

This laddering strategy can save you money if you know your coverage needs won’t change. For example, if a 30-year-old in excellent health bought the above three policies, they’d end up paying a total of $10,470 in premiums after 30 years, according to Quotacy, a life insurance brokerage firm. To compare, if the same applicant bought one 30-year policy with $1 million of coverage, they’d end up paying $16,260 after 30 years.

However, if your coverage needs aren't as straightforward or predictable, you may be better off buying one policy and adjusting your coverage over time. Many insurers will let you decrease the coverage and pay less, within limits. You can also buy more coverage if your needs increase, but you may have to complete a life insurance medical exam or answer questions about your health to do so.

» MORE: Life insurance application

Why you may need more than one life insurance policy

Here are some examples of when you may want to buy more than one policy.

• You own a small business. You may want a term policy to take care of your family and another to cover business loans or operational costs were you to die unexpectedly.

• You need to cover final expenses. You might consider a separate burial life insurance policy to cover final expenses like funeral costs. These policies are a type of permanent life insurance and pay out a small death benefit regardless of when you die, as long as the premiums are paid.

• You want to leave an inheritance. If you’d like to leave a lump sum to someone no matter when you die, you could look into buying another permanent policy, such as whole life insurance.

• You need more coverage than your employer offers. A group life insurance plan is usually worth a year or two of your salary, which may not be enough to cover your family’s needs if you die early.

» MORE: Do small business owners need life insurance?