As you know, life insurance is an insurance policy that pays your beneficiary a lump sum benefit if you die during the policy period. For some expats, a single policy can more than meet these needs. However, there are many situations where expatriates find that having more than one might make more sense. So, as an expat, can you have more than one life insurance policy? Here we will look more in depth at this and understand when it’s appropriate.
So, how many policies am I allowed to buy?
In theory, you can buy as many policies as you want, from as many different insurance companies as you want. However, the caveat is that when you apply, they will ask about whether you have any other coverage and what those limits are.
This is done to make sure you’re buying a reasonable amount of cover that is appropriate for you. You can technically buy as much as you want but insurers will ask questions if you’re purchasing cover that equates to over 20 times your annual income. Life insurance companies will want you to justify your purchase because if you’re buying a lot of insurance, especially if this is done in short period of time as they may view this as a red flag.
What are the reasons to consider multiple policies?
The simple answer is to protect the different liabilities for the right amount at the right time. Many expats have different circumstance that they need protecting at different points in their life and considering a plan to protect each event is often very prudent planning.
For example, many expatriates may purchase a life insurance policy to pay for a mortgage and another policy to cover your first-born child and cover living expenses of your family. As a family grows, it is common to see further policies added.
So how might this work in practice if you have just had a child?
If you have a baby, your life insurance needs will be the highest for the 15-20 years when they’re still very young and not able to provide for themselves. After that, your insurance needs will likely continue to decrease as your dependents grow up and begin to provide for themselves.
As an example of how this might work, you might purchase a “ladder” or 3 term life insurance policies:
A 10 year term policy for USD 500,000
A 20 year term policy for USD 300,000
A 30 year term policy for USD 200,000
In this example, you would have USD 1,000,000 worth of total coverage in the first 10 years (the period of highest risk). Then for 10 years after that, you would have USD 800,000 in total coverage and USD 200,000 for the last 10 years.
After that you would have no coverage, but your child will be 30 years old by then and at that stage would be (hopefully!) able to provide for themselves.