Dear Dave: A relative of mine recently mentioned that she has 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? -Victoria
Dear Victoria: There is no rule prohibiting 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.
It’s cheaper to have one policy, in general, 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 for having 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, since the majority of insurance companies have insurance to back them up with the state, or are very financially stable.
Hope this helps, Victoria! — Dave
(Dave Ramsey is a seven-time #1 national bestselling author, personal finance expert, and host of “The Ramsey Show,” heard by more than 18 million listeners each week. He’s appeared on “Good Morning America,” ” CBS This Morning”, “Today”, Fox, CNN and many more. Since 1992, he has helped people regain control of their money, create wealth and improve their lives. He is also the CEO of Ramsey Solutions.)