No limits have been set regulating the number of life insurance policies that an individual can have at one time, nor are there any requirements as to how many different companies an insured person can buy life insurance from. There are many pros and cons to using one insurance company. Having life insurance protection with more than one insurance company may be a great idea for a complete portfolio, but make sure to understand the pros and cons to make the decision that best fits the needs of the insured person.
Insolvency is when an insurance company becomes obsolete and does not have the funds to pay claims for death benefits. One pro for having more than one insurance company is that if one of the insurance companies were to become insolvent, the insured person would have other forms of life insurance protection in place. The Life and Health Insurance Guaranty Association for the state will cover a certain amount of a cash surrender or death benefit if an insurance company becomes insolvent, but not all it.
Steady Growth toward Security
Many individuals with low financial resources must purchase life insurance as they can afford it. Another pro in favor of multiple life insurance companies and policies is that in such a case the insured person has the ability to grow towards their security as their financial strength grows. The insured individual can continue to purchase life insurance policies from various companies as they can afford to add the coverage to their portfolio along the way.
Discounts for Large Death Benefits
Some insurance companies offer discounts for large death benefits. Basically, in a situation where the insurance company offers a discount for a large death benefit policy the insured individual has an opportunity to save money by purchasing only one plan and by keeping their life insurance with that one company. An individual with several smaller death benefit policies at various life insurance companies can potentially miss out on such a discount.
With there being so many different types of life insurance available, having multiple plans at many insurance companies can cause confusion. Trying to keep the plans details straight and trying to remember what plan has certain provision, such as which policy is the permanent plan and which policy is the term plan can cause confusion and can cause an insured person to mix up provisions with each company on different policies.
Contract or Administrative Fees
Additionally, another con to having more than one life insurance policy with more than one life insurance company is that an insured person may pay additional fees. Many life insurance policies have contract fees or administrative fees for each policy. If an insured individual has several policies with multiple companies they may be paying more than their share of contract or administrative fees.
Policy owners should take the time to weigh all of the pros and cons as to whether they should have more than one life insurance policy. In addition, they should consider whether to have more than one life insurance company. Having various plans with various companies can protect an insured person against insolvency and allow them to grow a steady portfolio providing a secure future for their families, but it can also cause confusion and undue overpayment of fees.