In the following article we will address a couple common questions. First, we will answer the question “Can you have multiple life insurance policies?” Second, we will also address the question of how many life insurance policies you can have. And we promise to provide answers that are different than perhaps every other website out there.
Can you have multiple life insurance policies?
The quick answer is yes, you can have multiple life insurance policies. In fact, I have many policies myself, consisting of some term life insurance and a lot of permanent life insurance. So, once I tell people this the follow up question is usually…
Why do you have multiple life insurance policies?
When I first started off in the life insurance arena I was taught that the best tactic was to buy term and invest the difference. If you are not familiar with buy term and invest the difference, AKA BTID, it is the idea that you should buy cheap term life insurance and the difference in price between term life and permanent life insurance should be used to buy mutual funds, stocks or bonds.
You see, that is pretty much what everyone thinks and teaches. From your run-of-the-mill life insurance agent to your Certified Financial Planner, to Suze Orman or Dave Ramsey, the only smart move is to practice BTID because that is what everyone is doing. The only problem is, when everyone is doing one thing, if you are like me, it raises some red flags. And so, I began to question the status quo advice.
What I found was a new way to do life, particularly when it came to how I utilized my money. I discovered a concept called infinite banking. The idea or concept involved using cash value life insurance to act as your savings and liquidity vehicle, also known as a wealth accumulation account, where you built up savings to be used for your “home base” or “safe bucket”, with the funds in that account going towards investments or large purchases.
Rather than using the BTID concept and giving all your money to Wall Street, you steward your own money in your life insurance policy. You can access your money by using it as collateral, taking out a life insurance loan and using the money for whatever you want, whenever you want. The cash value grows in a tax deferred environment, loans are income tax free and there is a leveraged death benefit that is paid to your beneficiary income tax free.
A Paradigm Shift In How I Viewed Life Insurance
Prior to discovering infinite banking, I owned convertible term life insurance. However, the policy would be converted to guaranteed universal life, which had very little cash value growth.
After discovering infinite banking I purchased my first whole life insurance policy so I could determine first hand if this concept was real or not. As Nassim Taleb, author of Skin in the Game states,
“Never trust anyone who doesn’t have skin in the game. Without it, fools and crooks will benefit, and their mistakes will never come back to haunt them.”(1)
You see, I knew I needed to actually do it, I could not simply theorize about it. So, I took the plunge by purchasing my first permanent life insurance policy. And over time I discovered that the concepts taught by Nelson Nash, and others such as Pamela Yellen and Kim Butler, were not just pie-in-the-sky wishful thinking, but tried and proven strategies that are life changing.
Buying Many Life Insurance Policies
You can have more than one life insurance policy. Over the years I have purchased many more life insurance policies than just my original term insurance policy. Once I became a believer in permanent life insurance coverage I simply had to get every last bit of my money away from banks and into cash value life insurance.
How Many Life Insurance Policies Can You Have?
The short answer is you can have as many life insurance policies as you qualify for.
The longer answer is, it depends. Life insurance must be qualified for. However, you can also own life insurance policies on another person.
For example, I own life insurance for my kids that I plan on gifting to them down the road after I have taught them about how to be good stewards of their money and how to utilize their own life insurance policies.
I own multiple life insurance policies on myself and on others. There are some basic requirements set forth by the life insurance companies that you must adhere to.
How to Qualify for Multiple Life Insurance Policies
We wrote an extensive article covering the life insurance medical exam. The bottom line is, life insurance must be qualified for. If you are getting life insurance for your kids or as a business owner for a key employee, the insured must qualify for the life insurance coverage.
The two primary criteria a life insurance company will consider are your health and your income.
You see, a life insurance company wants to know the insured is healthy. If you have a pre-existing condition it will limit your ability to qualify for life insurance. For example, certain pre-existing conditions, such as high blood pressure, may not affect your ability to qualify for coverage. However, more high risk pre-existing conditions, such as cancer or heart disease, may potentially lead to your life insurance being declined.
If you can pass your health exam and get through life insurance underwriting you will then need to qualify based on your income. Life insurance companies will allow you to get a multiple of your income.
Multiple of Income
You can get a multiple of income based on your age.What that means is, you can get life insurance coverage based on how much money you make.
The following general rules apply based on the particular life insurance company you apply with.
- Age 40 and Younger: 25X your income
- Age 41-50: 20X your income
- Age 51-60: 15X your income
- Age 61-70: 10X your income
- Age 71-75: 5X your income
- Age 76 and above: Case-by-case basis
Your multiple of income is the determining factor in deciding how many life insurance policies you can get. If your income is $100,000 a year and you are 45 years old, you can get a maximum of $2,000,000 of life insurance (100K times 20).
So, that might be one large term life policy or permanent life insurance policy. Alternatively, you might break it down into both a term life insurance policy and a permanent life insurance policy. Further, you might have many term policies and permanent policies based on your human life value.
(But then you also have to factor in any policies for your children or even grand children. You may end up with double digit life insurance policies of which you are the owner.)
For many people, getting the most life insurance possible is contrary to their underlying belief system. They are simply trying to get enough term life insurance to replace income and cover dependents. Once the kids are grown, the term policy ends and they no longer have life insurance.
I take a different approach. I utilize the benefits of life insurance and plan on getting more and more life insurance as my net worth grows. One of the many reasons why is because the death benefit on my whole life policies grows as I age. So the closer I get to that inevitable day, the larger my death benefit will be. In the end, my life insurance beneficiaries will receive a huge inheritance, as I pass on to future generations my wealth and legacy.
Final Thoughts on Multiple Life Insurance Policies
I would encourage you to take some time to investigate the various articles linked to from this article. For far too long, permanent life insurance has received a bad rap. But it is a key ingredient when it is used as part of a complete wealth building strategy. And you don’t have to be the top 1% to utilize the benefits.
We are here to help you achieve financial independence. Please check out our resources page for more information on what we can do for you. Also, please give us a call for a complimentary strategy session, where we can answer any questions you may have.