People often purchase multiple life insurance policies for various reasons, such as to increase their overall coverage, diversify their investments, or meet different financial needs.
Here are a few reasons why someone might consider having multiple life insurance policies:
Income Replacement: If you have dependents and need to provide for their financial security in the event of your death, you might purchase one policy to cover immediate expenses and another to cover long-term needs, such as mortgage payments and school or university fees.
Diversification: Some people choose to diversify their insurance coverage to spread risk and manage costs. This can involve having policies from different insurers.
Topping up life insurance within superannuation: Some people may decide to top up their life insurance in their superannuation if they feel it falls short of their needs. The Rice Warner ‘Underinsurance in Australia 2020’ report indicated there is a gap between how much cover many Australians have through super, and how much they may need. The report reveals, “the median default cover of superannuation funds meets approximately 65% to 70% of basic level death cover needs for average households, but a much lower proportion for families with children.”
If you are thinking about purchasing or holding multiple policies: Keep in mind that when you apply for multiple policies, insurers may require you to provide information about your existing coverage, and they will assess your eligibility based on your medical and financial situation. Additionally, premiums will be based on factors such as your age, health, and the type and amount of coverage you are seeking.
References:
https://www.ricewarner.com/new-research-shows-a-larger-underinsurance-gap/