How Many Life Insurance Policies Can You Have?

Life insurance is a financial protection policy that pays out money to your beneficiaries in the event of your death. In the UK, there is no legal limit to the number of life insurance policies you can hold, and you can purchase different policies from various providers. However, there are limitations as many insurers have a maximum benefit amount that will apply to all your policies cumulatively, and you may have to disclose existing policies when applying for a new one. There are both advantages and disadvantages to having multiple policies, which should be carefully considered.

There is no legal limit to the number of life insurance policies you can have in the UK

In the UK, there is no legal limit to the number of life insurance policies you can have. While you can have multiple policies, it is important to consider the cost of maintaining numerous policies and whether you need that level of coverage. Life insurance is designed to replace your income and support your loved ones financially when you die, so insurers will limit the total amount of coverage you can get. This is typically 20 to 30 times your annual income.

Having multiple life insurance policies is often referred to as "laddering". This strategy involves buying multiple policies to cover different needs and goals. For example, you might have a policy to cover your income, another to cover your mortgage, and another to provide for your children's education. By combining different types of policies, such as term and whole life insurance, you can tailor your coverage to your specific needs.

Additionally, you can purchase life insurance policies from multiple providers or the same provider. However, it is important to note that applying to multiple insurance companies simultaneously is generally not recommended as it may raise red flags and lead to denied coverage.

Before purchasing multiple life insurance policies, it is essential to carefully consider your financial needs and goals, both short-term and long-term. It may be more feasible and cost-effective to adjust your existing policy or purchase riders to fill gaps in coverage.

You can have multiple policies with different providers

In the UK, there is no legal limit to the number of life insurance policies you can have. You can have multiple policies with different providers, but there may be a maximum total cover that any one provider will agree to pay out, regardless of the number of policies you hold with them. This varies by provider but is usually between £5 million and £15 million.

When applying for life insurance, you will be asked about any existing policies you have, and insurers may verify this information by checking external databases and reinsurance company records to protect against fraud. If you want to hold more than one life insurance policy, you may have to disclose your income and assets and undergo additional medical underwriting requirements, such as a medical examination.

The benefits of having multiple policies with different providers include being able to meet different financial goals. For example, you may want to take out a decreasing cover policy for a repayment mortgage and critical illness cover to help with repayments if you are unable to work.

However, there are also drawbacks to having multiple policies. The more policies you have, the more premiums you will need to pay, and the less you will be able to save. It may be more beneficial to adapt an existing policy or opt for specialist cover, such as income protection insurance, instead of taking out a second life insurance policy.

You may need to disclose existing policies when applying for a new one

When applying for a new life insurance policy, you will likely be asked about any existing policies you have. Insurers will verify the information you provide by checking the MIB Group database, which has files on consumers who have applied for life insurance. They will also interact with reinsurance companies that act as reporting entities for coverage already provided to individuals by other life insurers. This is to protect against fraud and to understand whether you already have coverage or have applied with multiple companies at the same time. If the insurer thinks you are trying to get more coverage than you can justify, they may decline your application.

If you are applying for a very large amount of coverage (typically $5 million or more), most insurance companies will require you to provide financial statements from a third party, such as an accountant. Even if you are not applying for millions of dollars' worth of coverage, you may still need to provide your tax records to justify getting an additional policy. For example, the current annual income of freelancers, contractors, and those with seasonal work might not provide an accurate representation of the income that would need to be replaced with life insurance.

If you want to get a very large amount of life insurance, you might have to get several policies with multiple companies rather than just one additional policy. This is because insurers often limit individual policies to $5 million or $10 million to limit their risk.

You might have to provide proof of income and assets for higher-value policies

While there is no legal limit to the number of life insurance policies you can take out, there is also no optimum number. The priority is to get the cover you need at a cost you're comfortable with.

When applying for a higher-value policy, you may be asked to provide proof of income and assets. This is because insurance providers use a combination of several factors to calculate life insurance premiums, including how much cover you require and your lifestyle. For example, if you have a bigger house and a larger mortgage, you will need a larger amount of life insurance cover.

If you have multiple policies, it will take more effort to keep track of and manage them. Also, based on a range of factors, including your age and health, the cost and terms of your additional policy may not be as favourable.

You may be subject to additional medical underwriting requirements

When applying for life insurance, you will be subject to a medical underwriting process. This is where the insurance company assesses your health status and determines the level of risk associated with providing coverage.

There are two main types of medical underwriting: Moratorium Underwriting and Full Medical Underwriting. With Moratorium Underwriting, you don't need to disclose your full medical history, and any condition you've had in the five years before being insured will be excluded. After two years free of treatment, medication or advice for that condition, you may then be covered. This type of underwriting is best for customers with well-managed pre-existing conditions or those who don't need treatment for a pre-existing condition.

Full Medical Underwriting requires you to complete a questionnaire about your medical history and, in some cases, provide access to your medical records. This type of underwriting may be more suitable if you need insurance for a pre-existing medical condition that is excluded with Moratorium Underwriting.

During the underwriting process, you may be asked to:

• Complete a full medical questionnaire
• Consent to the insurance company accessing your medical records
• Undergo medical screening, such as blood and urine tests
• Take part in a tele-interview
• Have a medical examination

Based on the underwriting process, the insurance company will either approve or reject your application. If approved, they will determine the amount of coverage and the premium you will pay. The more risk the insurance company assumes, the higher the premium will be.

It's important to be honest during the underwriting process. Failing to disclose a pre-existing medical condition may result in your claim being rejected or your policy being revoked.

Frequently asked questions