Fidelity Life: Should Policyholders Get Permanent and Term Life Insurance?

Some people seek out term life insurance for its simplicity and lower cost. Others look for permanent insurance to provide lifetime coverage for their loved ones, even if it costs more. But a policyholder can have term and permanent life insurance policies at the same time — and in some circumstances, getting both may make sense. Read on to learn if there's a limit to how many life insurance policies people can own, and when policyholders should consider getting both term and permanent life insurance.

Is there a limit to how many life insurance policies one can have?

There is no legal limit on the number of life insurance policies someone can own. Life insurance companies may not care about the number of plans a policyholder has, but they do care about the policyholder's total benefits across all policies. So, before applying for another life insurance policy, a policyholder should make sure they can qualify financially for the added benefits. A policyholder's coverage limit can depend on their age, income, and insurer. For instance, a policyholder between the ages of 50 and 60 may be limited to coverage worth 10 to 15 times their annual income, while someone under 40 may qualify for coverage up to 20 or 30 times their income. 

When is it a good idea to get permanent and term life insurance?

Policyholders with permanent and term policies will pay more in total premiums, but having both types of life insurance may be worth the cost for people in the following situations:

The policyholder needs more coverage

A policyholder might simply need more coverage over a specific timeframe. For instance, a policyholder may get permanent life insurance to protect their spouse, but then the couple has a child. To provide extra coverage for the family, the policyholder may want to purchase a 20-year or 30-year term policy just in case they pass away before their child is an independent adult.

Additional permanent coverage may be too expensive

Permanent life insurance premiums can be much higher than the payments that come with term policies, so policyholders that need additional coverage may not be able to afford two permanent policies. Instead, they can supplement their permanent policy with term life insurance to get the coverage they need at a more affordable rate.

The policyholder has an advanced long-term financial plan

Permanent life insurance policies come with a cash value account that part of each premium goes into. This cash value account can grow tax-deferred, allowing the policyholder to build wealth. If a policyholder with term life insurance maxes out their retirement accounts, getting a permanent life insurance policy may be a wise choice to invest more of their money and let it grow.

The bottom line

Permanent and term policies both come with their own benefits, but in some instances, policyholders should consider getting both. Whether a policyholder needs more coverage due to a major life event, can't afford two permanent policies to get the coverage they need, or has an advanced long-term financial plan, having both policies can be the best option for their needs. Policyholders should do thorough research and consult with a financial advisor or life insurance agent if they need help deciding whether to get an additional life insurance policy.