You are allowed to have more than one life insurance policy – in fact, there’s no limit to how many policies you could take out. However, multiple policies will demand additional admin and costs that may not be necessary.
First, you should first always aim to take out a single policy that meets all your needs, so as to avoid doubling up on cost and cover. On that note, it’s important to frequently review your current policy to ensure it continues to offer you the level of cover you require – if it doesn’t, it may be easier to modify your existing policy rather than take out a new one altogether.
In addition, you may be considering extra insurance for circumstances like critical illness or death in service. Usually, you can add these on to any existing policy rather than needing to take out a new one. It’s worth knowing as well that many employers offer these add-ons as part of your employment benefits, so it’s possible you already have multiple policies.
Sometimes though, having more than one policy might better befit your circumstances. One example is having key-person insurance if you start a business, which protects your company if an individual passes on. Another is if you have a joint life insurance policy with your partner; with these, you’ll receive a payout only upon the first death, after which the policy expires. In that event, you may find still need life insurance, for example if you still have dependents; therefore, taking out another individual policy could be of benefit as well.
Last, if you have a second life insurance policy in trust, then it could be kept separate from your estate and therefore may not count towards the inheritance tax threshold.
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