Life insurance is a commodity that we all can benefit from. If you have a family and multiple financial obligations, you may need several policies to provide financial security for your loved ones. Multiple term life policies can be stacked together to provide a large enough death benefit to pay off your debts and also provide for your family. The number of policies you choose to purchase is up to you and will depend on what your financial goals are for the future.
How Many Life Insurance Policies Should a Person Have?
You can own as many life insurance policies as you want as long as you don’t exceed your insurability limit. In most cases, this limit is approximately 20 to 30 times your yearly wages. Because insurance is meant to replace your earnings for a specific amount of time, a cap is placed on the amount of insurance you can purchase. Insurance companies don’t want you to become a cash cow for others who may benefit from your death.
How Does It Work If You Buy More Than One Policy?
Laddering is a term used when a person has purchased several life insurance policies. Buying three policies for different amounts and different lengths of time will allow you to match your most important financial needs. These often include paying off your home, caring for your children, and paying off other types of debt.
- Die within the first decade – Dying within the first ten years may result in all of the policies paying out. Your debts will be paid, and your children will be cared for.
- Second decade – During the second decade, the first policy will have expired. The others, however, will pay out and cover the financial obligations that you may still owe. If any children are still living at home, they will be cared for.
- Third decade – Dying during the third decade, only one policy will be left and will more than likely be the one with the least amount of coverage. With most of your debts paid and your children out on their own, your financial need may require a much lower payout than when you first started buying life insurance.
Laddering saves money and still ensures that you can provide for your family in the event of a tragedy. If you are certain your financial needs will not be changing dramatically, this setup may be perfect for covering your financial obligations.
Why Multiple Policies May Be Needed?
We all have financial obligations or debts that may need to be paid once we pass away. If you own a small business (by yourself or with family) or you would like to leave a small inheritance to your family, multiple policies may be needed to ensure that you have enough of a death benefit to accomplish those goals.
Leland Smith Insurance Can Help!
Taking care of your family is a top priority. If you are concerned that one life insurance policy will not be enough to take care of all of your financial obligations and concerns, contact us at Leland Smith Insurance. Our reputable agents can evaluate your future financial goals and develop a group of policies that will help you make those goals happen.