Dear Dave: A relative of mine recently mentioned that she had two life insurance policies. Is it acceptable for a person to have more than one life insurance policy? If so, why would anyone do that?
Dear Victoria: There is no rule against having more than one life insurance policy. The only real problem is that it might complicate your life a bit in terms of multiple premium withdrawals, checks, or possibly additional policy fees that you have to worry about every month. Generally, it’s cheaper to have just one policy, but whether you have one or more, I always recommend having 10 to 12 times your annual income in a good term life insurance policy.
Different people have different personal and professional financial situations, so there can be many reasons to have more than one life insurance policy. I have a lot of assurances related to our estate plan, our business, and different kinds of things. Most life insurance companies only write a limited amount into single person coverage, so when this was the case, I simply went to another insurer for additional coverage.
Also, some people buy more than one life insurance policy just to feel secure from the provider’s perspective. If an insurance company goes bankrupt, it will always have another policy – or more – in place. This is usually not a big deal, however, as the majority of insurance companies have insurance to back them up with the state or are financially stable.
Hope this helps, Victoria.
David Ramsey is a seven-time #1 national bestselling author, personal finance expert, and host of “The Ramsey Show.”