Can you have more than one life insurance policy?
Updated on Tuesday 23 March 2021
You may have existing life insurance in place and since the inception of that policy, your circumstances might have changed; perhaps you’ve given up smoking or had a new baby.
Or maybe you’re considering taking out life insurance for the first time and want the ultimate protection afforded and think perhaps two policies might be better than one.
For whatever reason you’re contemplating taking out more than one life insurance policy, to help you decide if this is best for you, we’ve put together this little guide.
In this guide:
How many life insurance policies can you have?
Can you have two life insurance policies UK?
Do I need more than one life insurance policy?
Life insurance explained
There are two main types of life insurance in the UK:
Term life insurance
Term life insurance pays out a lump sum to your dependants should you die during the course of the policy term. Typically, this type of policy will cover you for a term of between 20 and 40 years, depending on your age at the date of inception (and the length of policy you require).
Term cover helps to cover the cost of anything and everything your dependants might need help to pay for after your death, including the cost of your funeral and mortgage or rent payments.
Whole life insurance
Unlike term life insurance, which only covers you for a certain term (number of years), whole of life insurance covers you for the whole of your life.
This type of insurance policy is also very often referred to as ‘life assurance’. The majority of whole life insurance policies are usually more expensive than term life insurance and generally have the added bonus of being able to ‘cash in’ some of the policy value at any time. You can also use the value of the policy as collateral for borrowing mone - you cannot do either of these things with a term life insurance policy and these terms also depend entirely on your insurer and your specific insurance policy.
You may want both types of life insurance policies so that you have complete cover for every eventuality. Whether you can afford to take out both types of insurance is a different matter - term life insurance is usually much more affordable than whole of life cover.
Whilst [temporary] term cover offers more flexibility and initially costs less, as you get older, the premiums can increase and, should you outlive the policy term, there will be no financial gain for you or your dependants and taking out a new policy after that will cost a lot more due to your age and potentially worsened health status. Term cover only pays out if you die before the term ends; nothing more.
Conversely, whole life isn’t quite as flexible (as unlike term policies, you can’t change the premiums or death benefit) and initially, this insurance costs more. However, you don’t have to worry about taking out a new policy later on in life as it covers you for your entire life. And in addition to paying a guaranteed lump sum to your beneficiaries on your death at whatever age you die, you can cash in your policy or use it to help borrow money.
What insurance you need very much depends on your personal circumstances and preferences.
Check out our guide: Life Insurance FAQs for more in-depth information about life insurance.
How does life insurance work?
You pay monthly premiums to an insurance company for an agreed term or for the rest of your life and upon your death - either during a fixed term of years (term life insurance) or whenever you die (whole life insurance) - a lump sum will be paid out to your dependants.
Life insurance can help your loved ones pay for funeral costs, debts or household bills or can help you pay for end-of-life care and avoid hefty inheritance tax bills.
For more detailed information, check out our guide: How does life insurance work in the UK?
Do I need life insurance?
If you’re incredibly young with no financial dependants (i.e. no one relies on your income to keep a roof over their heads or pay their bills) or you have no huge financial commitments like a mortgage, then possibly not. That said, the younger you are when you take out life insurance, the lower the cost of premiums.
If you are still young without dependants, you may still want to ensure your family or a close friend receives a lump sum on your death to help pay for your funeral costs and any other expenses they may need to pay, or perhaps make provision to pay for end-of-life care costs for yourself, then yes, you do need life insurance.
If you have dependants (i.e. a long term partner, spouse, civil partner and/or children) and they would struggle financially and/or could lose their home if you were to die then, yes, you do need life insurance.
To consider what else you may need to plan for in the future, take a look at our useful guide: Late life planning and why is it important?
How many life insurance policies can you have?
You can have as many life insurance policies as you wish; there is no legal limit. But whether this is financially beneficial or worthwhile will depend on a variety of circumstances.
If you have an existing policy with a flexible insurer that will allow you to change its terms, premiums, death payout, etc, without too much hassle or additional cost, then you should consider increasing your existing policy rather than looking elsewhere.
It may be that you want to make sure that you have a whole life insurance policy that will pay out regardless of when you die so that if you live beyond your term insurance policy and it comes to an end, you are still covered. This way you avoid heftier premiums by taking out a new policy at a much older age.
Another benefit of having two policies could be where you are a couple who are considering joint life insurance, but want to avoid the pitfalls of the policy ending when one of you dies. If you take out two separate insurance policies, you can ensure cover is still in place for the surviving party (if one party were to pass away as per the policy terms) as taking out a separate, new policy at a later date (when you’re much older) will increase the premiums.
There are many different types of life insurance policies for different eventualities and it’s best you fully and thoroughly assess what cover and protection is afforded by each type of insurance. We recommend you get advice from an independent life insurance broker to be certain you get the right cover and protection for you and your loved ones.
Note: Two insurance policies covering same risk should be avoided as it can complicate making a claim and you will probably pay more than is necessary for doing so. This is called ‘double insuring’ and can mean either insurer may only pay out a portion of your claim and not the full amount. So if you do decide to take out more than one policy, make sure you are not double insuring.
Can you have two life insurance policies UK?
Yes, you can have two life insurance policies in the UK as there is no legal limit on the number of policies you can have.
Before taking out additional insurance policies you should always check with an existing insurer (if applicable) what additional cover they can provide and for what price and then compare this to what is being offered elsewhere.
If you do take out more than one policy, you must avoid doubling up on insurance risks and cross-reference the terms and conditions of any policy(ies) to ensure this doesn’t happen as having two policies could end up being pointless. If you have two policies covering the same risk, either insurer could end up only paying a portion of your full claim.
Also, check if an insurer offers a multi-policy discount before deciding where to take your business and compare UK quotes online.
Do I need more than one life insurance policy?
Circumstances where you may need more than one life insurance policy include:
- You are a couple who want two single life insurance policies instead of a joint life policy so cover continues for the surviving party after the death of the other.
- You may want to have a separate policy simply to cover inheritance tax liabilities and have a policy held in trust so any lump sum insurance payment is not taxed.
- You only want fixed term life insurance to cover a huge financial commitment like a mortgage but want cover for your whole life in every other aspect - make sure there’s no duplication of risk cover if you take out two separate policies.
- You may have a business and want key person insurance to protect your business in addition to a private, personal policy to separately protect your loved ones.