Are you’re wondering if it’s possible to take out more than one life insurance policy? If you are, the answer is yes, you can. Are you’re wondering if you should take out more than one life insurance policy? If you are, then once again, the answer is yes. Taking out more than one life insurance policy is not only possible, it’s advised. Even though it might not seem like a regular thing to do, taking out multiple life insurance policies is more common than you would think. How and why is that the case, we’re going to explain in just a few moments, as well as tell you a couple of tips and things to consider when buying multiple life insurance policies.
Let’s take a closer look at what we’re doing here. Like we’ve said, you can take out multiple life insurance policies as long as it is under the insurability limit. Although this might seem like a problem, it usually isn’t. The insurability limit is determined by your annual income. If you’re in your 30s, your limit would be what you would make in the next 25 years on your current salary. So, if you’re making £100,000 per year, the limit would be 2.5 million dollars. As you get older, the limit is lowered, but it will still be high enough for you to take out several life insurance policies with no problems.
Taking out multiple policies is called laddering. It’s a very common strategy that can save you a lot of money in the process. Now, we understand how the limit is set, but, why would you need a couple of them when you can only take out one insurance policy for the maximum amount and how much money can you actually save?
First of all, let’s take a look at the expenses of the traditional whole life insurance policy. Let’s say for example you take out a whole life insurance policy for half a million dollars. That would mean that in case of premature or sudden death, your spouse or child would get the said amount of money. However, the monthly fee, or a premium, for a whole life insurance policy for said amount would be over £500. Sure, in the case of a tragic death that money would ensure that the mortgage is paid off and kids are put through college, but if you live a long healthy life, you’d still have to pay over £500 a month as long as you’re alive. It’s easy to calculate the money spent if you live for another 50 years.
Now, let’s take a look at this. On one side, you opt-out for a £250,000 20 year policy and another £250,000 30 year policy. On the other side, you opt-out just for a single half a million policy. Which one do you think would save you more money during the 30 year period? If you guessed the first one, you were correct. We’re going to explain why and how by presenting you with approximate numbers for monthly fees, but if you’re willing to do the precise math, you may check out lifecoverquotes.org.uk and get better and more accurate data.
So, in the first case of 20/30 year terms, you would pay, for example, £40 a month for the first 20 years and after that, you’d be left with £25 a month for the remaining 10 years. In the other case, you’d pay £42 a month during the whole 30 years. With those numbers, the overall cost of the insurance for the 30 years in the first case would be £13,800 and £15,120 in the second. You can clearly see that the first plan would save you over £1300 over the 30-year-old period. As we’ve mentioned, these are rough, approximate numbers, however, they’re pretty close to the actual ones. We’ve also calculated an annual fixed policy charge since that is an expense you’re expected to pay for each individual policy.
Now that we’ve explained to you how and why laddering life insurance is beneficial, let’s take a look at some tips.
1. Decide whether you need it or not
Even though life insurance is advised, there is a case you might not need one. If you’re an individual that has no debt whatsoever, you have a steady, well-paying job, aren’t married with kids or you’re not financially responsible for anyone but yourself you probably don’t need one. This is rarely the case because most of us have someone significant in our life, whether it’s family or friends.
2. Calculate how much you need
You might be tempted to take out a policy for the maximum amount possible, but that may not be financially responsible. Your monthly expenses will be enormous and that amount of money might not be needed at all. You need to consider the following things – final expenses, debt, and financial needs.
Final expenses are pretty self-explanatory and usually aren’t that high.
Debt is one of the crucial factors, so if you have a mortgage or any other kind of significant debt, your life insurance should cover it. If you’re debt-free, you may not need a large policy.
As for financial needs, it depends on how many people were dependent on you and at what stage of life they are. If you’ve left behind 2 kids that have yet to go to college, your policy should cover those expenses.
3. Pay annually, not monthly
Considering that the premiums for laddered policies aren’t that high, you should consider paying an annual fee instead of monthly installments. This will also save you some money in the long run.
4. Consider more options
Don’t make hasty and rash decisions, make sure you look for the best deal possible. This is a very competitive market and there are great deals out there. Crunch the numbers, compare the benefits, and choose the best one.
5. Inform your beneficiaries
Since you’ve already decided to take out a life insurance policy, make sure you inform your beneficiaries of it. It’s not common that the policies go unclaimed, but you do not want to take that chance. Make sure they know where the documents are and what you want them to do with the money.
It’s obvious that having a life insurance policy is a responsible thing to do and we’re sure you’ve already got one in the works, we just hope this article has helped you make the best decision possible for you and your loved ones.