Can you have more than one Life Insurance policy?

Can you have more than one Life Insurance policy? Thumbnail

Posted 26th January 2021 by Chris Reed

If you are questioning if you can have more then one life insurance policy, you are not alone. This is one of the most frequently asked questions we have especially from parents. So it’s simple… more cover equals better, right? Sadly, it’s not quite as simple as that. We aim to answer all of your questions on this topic below.

Can I take out more than one life insurance policy?

Yes. Lots of customers choose to take an additional policy. It is however best to consider your individual circumstances; often it depends on what type of policy you are looking for. For instance, if you already have a life insurance policy and you would now like to look for critical illness cover, it may be better to consider a second policy.

Remember, life insurance prices are based on your age, health and lifestyle. Also, any policies taken before December 2012 will have been affected by your gender1. So, as long as the cover amount you chose and term of the cover is still relevant, it may be cheaper to keep your old cover in place. In this case, it may make sense to take an additional policy to cover any new needs you have, e.g; a new or larger mortgage or an extra policy for funeral costs.

With critical illness it can be a little more tricky. Critical illness cover is a policy that pays out on a number of pre-defined conditions. Most cover major conditions such as cancer, heart attacks and strokes. The amount of conditions they cover and how broadly they cover each condition has changed many times over the years. It still varies greatly from one insurer to another. It’s very important to carefully read and compare the old policy documents and your new terms and conditions to ensure you know the key differences.

If you decided to use a non-advised broker such as Protect Line, they will happily help you understand the facts and key differences so you can make an informed choice.

How many life insurance policies should you have?

Again this is very much down to personal choice.

Sometimes people take individual policies to cover their different needs.

Take a look at this typical example of what a working parent may consider (let’s call her Sarah):

NeedPolicy Type TermAmount of Cover
Repayment MortgageDecreasing Term25 Years£250,000
2 Young ChildrenLevel Term20 Years£300,000
Funeral CostsWhole of LifeWhole of Life£5,000

As you can see in the example above, Sarah has chosen to take a decreasing term policy that is designed to reduce in line with her mortgage over the next 25 years.

She has then taken a policy for her 2 children that would be designed to help educate, clothe and support them should the worst happen to her until they are in their 20’s.

Sarah has then taken one final policy that will never run out called a “Whole of Life” policy. These policies are pound for pound more expensive than the other two but Sarah knows that her funeral costs are now covered no matter what age she gets to.

You may now be asking why Sarah chose £300k to cover her 2 children… Did you know that in 2020, Child Poverty Action Group (CPAG) ran a report that showed the average cost of raising a child to be £152,747?2

Did you know that according to Money Advice Service, the average cost of a Burial in the UK was £4,321?3

As you can see, it’s incredibly important to consider all your options. You need to ensure you are clear on what coverage you already have in place and whether a new policy will be more appropriate or come at a premium.

Can an individual take two policies and claim for both of them?

Absolutely. If you have 2 policies in place you can claim for both. Bear in mind that every insurer has a slightly different claims process. If you want to cut down on administration for whoever will be dealing with your estate, it may be wise to consider using the same insurer if you are choosing to take multiple policies.

If you use an independent life insurance broker, not only will they be able to give you a price for your current insurer but they will also help you to compare other prices, too. Remember, the price may change once the insurer has asked medical underwriting questions. Your broker will be able to use their knowledge and experience to understand if you’re likely to get a rating (increase in price) with each insurer.

Is it legal to have multiple life insurance policies in the UK?

100%. We often hear a myth that you can only have one life insurance policy. Sadly this means people regularly cancel their current policy when they may not have needed to.

All insurers have maximum amounts of cover they will insure you for until they start to ask for more tests, investigations or doctors reports. These limits are relatively high while you are young but start to reduce the older you are (at the point of taking cover out).

Insurers will also ask you questions based around your income and savings if you start to request very large amounts of cover. Insurers may refuse to cover you past a certain amount if you cannot prove a good reason for having a large amount of cover.

Can I just amend my old life insurance policy?

Possibly. There is a free feature included with most life insurance policies called a “Guaranteed Insurability Option”. This feature may allow you to increase the value or duration of your cover. Insurers tend to only allow you to use this benefit shortly after certain life events. These often include:

  • The birth of or adoption of a child
  • A new mortgage or increasing your current mortgage
  • If you get married or enter into a civil partnership
  • If you get a new job or a raise

If you meet one of the criteria set out by your insurer it may give you the ability to:

  • Increase or decrease your amount of cover
  • Extend or reduce the term of your cover
  • Remove a Life Insured (if you took out Joint Life Insurance)

Be sure to check your original policy documents to understand exactly what your current life policy will allow. If the Guaranteed Insurability Option does not meet your needs you should then consider speaking to a broker who can help you understand your other option.

Do I even need life insurance if I have death in service cover?

Death in service is a benefit usually provided alongside a company pension. Typically it will pay out a multiple of your salary should you die while working in your current employment. For example if your death in service is 4X and you earn £25,000 a year it would pay out £100,000 should you pass away.

There are 2 questions you need to ask yourself:

  1. Is the cover my employer offers enough? (Does it give you sufficient peace of mind for your family?)
  2. What would you do if this cover were to end? (Due to you leaving the company or your employer removes the benefit)

Number 2 is often the question people forget to ask. If you are with your current employer for 10 years, what would you do if you left, retired or were made redundant? Will you still be able to get life insurance? If you have picked up any health conditions in the last 10 years, it may make cover harder or more expensive to obtain. At worst you may not be able to get cover at all. As you are 10 years older, it is almost certainly going to be more expensive even if you are in perfect health.

Once people consider these facts they often decide to cover both bases. You could get a small lump sum with some private life insurance and then at least your family may end up with two pay-outs.

A newer policy may offer you more or enhanced benefits

Life insurance companies are constantly adding more benefits to their cover though typically these are not open to existing customers. It often pays off to weigh-up any new benefits versus what the difference in price may be for a new policy.

The types of benefits you may see with a new life insurance policy include (some may incur an extra charge):

  • Free access to a GP via telephone or video call
  • Mental health support
  • Fracture cover
  • Best doctors (2nd advice service)
  • A free Apple Watch (when you engage in a fitness programme)
  • Nutrition Support

These “added value benefits” vary greatly from one provider to another so it pays to shop around to find the best fit for you. If you don’t fancy all the leg-work, a qualified broker like Protect Line can help you sift through all the choices.

Can you have more than one beneficiary on a life insurance policy?

Yes. If you wish to specify who you would like the funds of your policy to be paid to, you can set up a “Trust”. There are different types of trust but in it’s simplest form you are choosing who gets the money from your policy (the beneficiary) and who will administer them getting the money (your trustee).

Protect Line offers a free Trust service when taking out a policy, in which we will help you to fill out the appropriate forms.

Trust planning is not regulated by the Financial Conduct Authority.

Is joint cover better than having two individual policies?

Most joint life insurance policies are designed to pay out once when the first person passes away. After that the policy is finished. In some cases this is exactly what people want. However, if you have children you may wish to keep your policy running after the first person dies.

If you were to have 2 single policies and you and your partner were to pass away (even at the same time) then your beneficiaries would receive double the pay-out.

People often assume that 2 singles will often be double the cost… oddly though, this is not true. Two policies are typically only very slightly more expensive than one joint policy. Therefore if both policies are claimed during the policy term it may actually work out a better value if you have two individual policies.

What happens if no beneficiary is named on a life insurance policy?

In England, once you pass away your money goes to your “estate”. What happens with your estate will depend on if you have a valid will in place. If not, then your assets will be divided up according to the “rules of intestacy”. If your estate is over a certain value then whoever benefits from your estate may have to pay inheritance tax (currently 40%). With life insurance you can choose to put your policy into “Trust”. This means you get to choose who the money is paid to (your beneficiary). Plus, it can potentially help make sure your estate remains under the threshold for inheritance tax.

Rules around wills, inheritance and tax are very complex. The information above should not be construed as advice. If you need help on any of these topics please source independent legal advice.

Tax planning and trust planning are not regulated by the Financial Conduct Authority.

What happens if I stop paying my life insurance policy?

If you stop paying, you risk your policy lapsing. If your policy lapses you will lose the ability to claim on your policy and you will not be entitled to any money you have paid in so far. It is always important when considering how much cover to take that you ensure the payments are going to be affordable.

Can I get help to understand my options?

Yes – absolutely. Protect Line have helped thousands of families since 2010. The beauty of using a non-advised broker is the fact that, no matter what your circumstances, Protect Line are obliged to give you all the facts and options available to you. It is then up to you to decide what’s best for you.

Want to read more before making a decision? Check out our Ultimate Life Insurance Guide

Ready to get a quote? Get your life insurance quote today

Protection plans with no investment element will have no cash-in value at any time and will cease at the end of the term. If premiums are not maintained then cover will lapse.
Critical illness plans may not cover all definitions of a critical illness. The definitions vary between product providers and will be described in the Key Features and Policy Document if you go ahead with a plan.

References

EU rules on gender-neutral pricing in insurance – https://ec.europa.eu/commission/presscorner/detail/en/MEMO_12_1012

CPAP – Cost of raising a child in 2020

 https://cpag.org.uk/policy-and-campaigns/report/cost-child-2020

3 Money Advice Service – Average cost of a funeral

– https://www.moneyadviceservice.org.uk/en/articles/how-much-does-a-funeral-cost