Some people have life insurance plans subsidized through their employer. Some people have life insurance policies that they have paid into for years. Despite already having life insurance, there may be times that you are looking for additional life insurance coverage. It is allowable for a person to have multiple life insurance policies, though insurers may frown upon having too much coverage. The experts at Hometown Insurance can help you find the right balance of coverage for your life insurance needs.
Term vs. Whole Life Coverage
If you have a life insurance policy through your employer, chances are you have a group term life insurance policy. Group term life insurance offers coverage that will meet basic needs. The value is often comparable with your annual salary, which would help your loved ones with some of the end-of-life expenses. However, this coverage is not specific to your individual needs and may not be sufficient.
An additional term life insurance may help cover the difference between your employer’s group term coverage and your individual needs. The most common options for individually purchased life insurance are either term life insurance or whole life insurance, also known as permanent life insurance.
Term life insurance policies have premium rate calculations based on finite terms such as 10, 20 or 30 years. This form of insurance is generally a cheaper option than whole life insurance. You and your agent choose the coverage to meet your specific needs.
Whole life insurance is an investment-style policy that builds cash value and has no expiration date. Because of its accruing cash value and lack of term limits, whole life insurance is more expensive than term life insurance.
Both types of policies can be customized to fit your financial needs, and both will offer a cash payout or death benefit. Your agent can help you find the right coverage option. Hometown Life insurance has examples of how a term or permanent life insurance may fit your family’s needs.
How Many Policies?
How many life insurance policies do you need? The answer depends on your financial situation and needs.
Variables that affect your life insurance needs include:
- Do you have kids?
- Do you have a mortgage?
- Do you want to leave an inheritance?
- Do you have debt?
- How old are you?
- How is your current state of health?
These variables will help you determine how many insurance policies you need and what type of coverage you need to select for each policy. For instance, if you have kids that are in college, a term life insurance policy to add a layer of protection until they graduate would be appropriate. If you are looking to invest in a plan that allows money to accrue for an inheritance, then a whole life insurance policy is the right choice.
The average life insurance coverage in Canada is $423,000, according to the Canadian Life and Health Insurance Association. Eighty-one percent of purchased life insurance premiums in Canada are individual policies, with 19% making up group term life insurance policies. These statistics support the benefits and popularity of buying a personal life insurance policy, even if your employer provides a group term policy option.
Realistically, it is not the number of policies that you own, but rather the total amount of insurance coverage you have. As your needs change, you may require more insurance to properly protect your loved ones and secure your future plans. You can purchase a second policy to address any coverage gaps found in the original policy. Our team at Hometown Life Insurance can help you understand if purchasing a separate policy, or rewriting a current policy for a higher amount will better suit your needs. Your specific circumstance will help determine the best approach and the most competitively priced solution.
Do Insurers Allow Policy Stacking?
Any time you have more than one policy to cover a specific risk, this is referred to as “stacking” in the insurance industry. While there are legitimate reasons you may want to stack life insurance policies, there may be some pushback from insurers if you attempt to secure too much life insurance.
Ideally, one life insurance policy can be constructed to meet your unique financial needs. That is not always feasible. The COVID-19 pandemic caused some difficulty for the insurance industry by affecting the ability to complete insurer requirements.
Insurers may require testing to determine someone’s current state of health when applying for new life insurance. These fluid tests may include blood tests or urinalysis. However, the COVID-19 pandemic restricted the ability of insureds to obtain such tests. Some agents and insureds chose to creatively approach this challenge by taking out multiple smaller life insurance policies to stack the coverages to achieve the insured’s larger coverage amount.
The Canadian insurance market is a stable industry, made reliable by the regulations that govern the appropriate premium rating for the coverages selected. If insureds and agents stack coverages, the combined policy premiums may not be enough for the complete coverage, especially once you consider the involvement of reinsurance in these kinds of claims. Undermining this system could cause harm to the life insurance industry, which negatively affects both the policyholder and the insurer.
To avoid the appearance of policy stacking, try to limit your life insurance policies to specify coverage gaps versus attempting to gain additional coverage limits. There are variations between the different types of life insurance policies that cause gaps in coverage. It is unnecessary to have two-term life insurance policies. However, it would still be reasonable to add a whole or permanent life insurance policy even when you have a group-term life insurance policy.
How do I Learn More?
To learn more about finding the right life insurance policy or policies, contact the Hometown Life Insurance experts at (289) 606-0103, or email us at [email protected]. Our licensed professionals will be happy to answer any questions you have.
Article Resources:
https://www.iii.org/article/what-are-principal-types-life-insurance
http://clhia.uberflip.com/i/1287746-canadian-life-and-health-insurance-facts-2020/13?
