Can I have Multiple Life Insurance Policies?

The short answer is YES you can – and in some cases, it can actually be a good idea. Many people purchase multiple term life insurance policies in a strategy commonly called “laddering”.

Life insurance is a type of insurance product that pays your beneficiary(s) a lump sum benefit if you die during the policy period. For most people, 1 policy is enough. But depending on your situation, having multiple policies might make sense.

How many policies am I allowed to buy?

You can buy as many policies as you want, from as many different insurance companies as you want! The caveat is that when you apply, they will ask about whether you have any other coverage and what those limits are.

They do this to make sure you’re buying a reasonable amount. You can technically buy as much as you want but they’ll ask some questions if you’re purchasing total life insurance limits of over 20 times your annual income. They want you to justify your purchase because if you’re buying a lot of insurance really quickly, they might see that as suspicious behaviour. What is “laddering”?

Laddering is a strategy used with term life insurance policies to save you money by making sure you have the right amount of coverage at the right time – especially if you’re like most people and your coverage needs decrease over time.

Let’s say for example that you’re looking at life insurance because you’ve just had a baby. If you have a young child, your life insurance needs will be the highest for the 10 years when they’re still very young and not able to provide for themselves. After that, your insurance needs will likely continue to decrease as your dependents grow up and begin to provide for themselves.

As an example of how this might work, you might purchase a “ladder” or 3 term life insurance policies:

  • A 10 year term policy for $4,000,000 HKD
  • A 20 year term policy for $2,000,000 HKD
  • A 30 year term policy for $1,000,000 HKD

In this example, you would have $7,000,000 HKD worth of total coverage in the first 10 years (the period of highest risk). Then for 10 years after that, you would have $3,000,000 HKD in total coverage and $1,000,000 HKD for the last 10 years. After that you would have no coverage but your child will be 30 years old by then and would be able to provide for themselves.

What’s another reason I might want to consider multiple policies?

If you have different goals, you might want to consider a policy for each goal.

For example you might want to purchase a small life insurance policy to pay for funeral expenses, another to take care of the mortgage, a 3rd policy to cover living expenses of your family, a 4th to pay for your children’s college education, and maybe even a 5th purchased through your small business.

Another common scenario is when someone has a smaller permanent (whole life) insurance policy but wants to add coverage for a specified period of time through a term policy.

Need help?

If you’re interested in life insurance and want to learn more about the different options and financial management strategies available to you, get in touch and we’ll be happy to guide you through this process.