Is There Any Limit to The Number of Life Insurance Policies I Can Buy?
Updated On Apr 26, 2021
Table of Contents
Life insurance policies are a protection for the family in the event of the sudden demise of the policyholder. It is a contract between the life insurance company and the insured, where the former pay the sum insured for the latter upon their death or disability. There is no limit to the number of life insurance policies that one can adopt, as long as they can pay the premium. The insurer will access the premium payment capacity of the insured, and the status of their health, before processing their request for multiple policies.
How Many Life Insurance Policies Can One Buy?
The number of policies that an individual wishes to buy, depends on their income and the quantum of coverage that they require to protect their family. Qualified individuals are eligible to buy insurance benefits that are about 25 times their annual salary.
Insurers are not concerned about how many policies one owns, but the total coverage that they have purchased. If the individual has more coverage with any one insurer, then they will start to examine their motives. They will try to figure out the reason behind the motive if the quantity of insurance is disproportionate to the needs. The life insurance company will try to prevent an excess coverage situation in two ways:
- It will verify if the applicant is in good health before issuing a policy
- It will ascertain their financial strata before qualifying for the policy.
The Insurability limit of an individual is the amount of total insurance that can be levied on a person across all the policies that insure their life. The company will take into account the current income, net worth, and other assets and income streams that one has access to, to determine the maximum coverage they can offer.
Merits and Demerits of More Than One Life Insurance Plan
There are sure of advantages and disadvantages of buying multiple Insurance policies. Its advantages are:
- It renders maximum flexibility to define each policy according to one’s needs
- The policyholder can buy the best product for each purpose.
- The individual enjoys an extensive cover and complete peace of mind.
On the downside, the policyholder has to pay a huge premium towards every policy. Buying many small policies will cost more than choosing a single policy. Insurance companies will require justification for both the health and the financial stability of the insurer before passing the request. If any information is hidden voluntarily, then it will result in the complete invalidation of all the policies.
Life insurance is a move to save one’s wealth and to create a source of income for the family after their demise. It is a wise move to invest enough in a life insurance policy, but not too much. The maximum insurance coverage that one requires can be calculated by keeping in mind the immediate obligations, existing resources, and future income.
You May Also Like to Read:- Life Insurance Opportunities for Millennials