Benefits of having multiple Life Insurance policies on your life

Is It Legal to Have Multiple Life Insurance Policies with different beneficiaries?

Yes, it is legal to have multiple life insurance policies, and you can nominate different beneficiaries for each policy. Insurers generally allow you to designate up to five beneficiaries for each life insurance policy you hold, although this may vary depending on the provider1.

However, there are some important considerations:

1. Coverage Goals and Needs: Owning more than one life insurance policy can make sense if you have different coverage goals. Assess your financial situation and determine your specific needs. For many people, a single policy is sufficient, but having two or more policies can be beneficial if you have varying requirements.
2. Insurability Limit: When you apply for additional policies, insurers will consider any existing coverage you already have. They want to ensure that the total coverage won’t exceed your insurability limit: The insurability limit is typically set at 20 to 30 times your annual income. It exists because life insurance is designed to replace your earning power, not to significantly increase the wealth of your beneficiaries. Insurers aim to strike a balance so that your death doesn’t appear too appealing to others.
3. Laddering Policies: Having more than one life insurance policy is often referred to as “laddering.” Term life insurance is commonly used for laddering because it’s cost-effective and allows you to purchase policies of different lengths. For example, instead of a single $1 million policy, you could consider:

• A 10-year, $500,000 term policy.
• A 20-year, $300,000 term policy.
• A 30-year, $200,000 term policy.

If you pass away within the first 10 years, all three policies will pay out, providing your family with a $1 million life insurance death benefit. These funds can help replace your income and pay off significant debts.