Multiple life insurance policies

What if I have different life insurance products, but with multiple providers?

For a life insurance product such as life cover, there are currently no restrictions in place against owning multiple policies with different providers. However, this may not be the case with life insurance plans such as trauma, TPD and income protection insurance. It is essential to speak to an insurance consultant if you require some advice in owning multiple life insurance policies, as they have the expertise and knowledge of the life insurance market.

Why have more than one life insurance policy?

• Cover Through Superannuation: Most Australian Superannuation funds will provide policyholders with some level of default life cover. These policies generally only provide a limited level of cover so many people to decide to take out an additional standalone policy to provide more comprehensive coverage.
• Policies for Personal Cover and Business Cover: Some people will have policies to protect themselves and their family from their own death as well as an additional policy to protect the key workers in their business or to ensure their business expenses are covered if they are unable to work due to illness or injury.
• Change to Policyholders Situation: Some people may decide over the course of their policy that they do not have an adequate level of protection in place following key changes to their situation. Such a change could be the birth of a new child or upgrading houses. While many policies will enable people to increase their sum-insured, it may be more beneficial in some cases to take out an additional policy with benefits tailored to the applicants new needs.
• Greater level of cover: Some applicants may wish to give themselves an extra level of protection that is not offered by on their current policy. For example a Life Cover policy may offer Trauma Cover as an extra feature but the person may decide that the Trauma cover does not offer the necessary benefits and features that are available on a standalone policy.

Read more on consolidating different superannuation life insurance plans

Important considerations for those wanting multiple life insurance plans

Life insurance is a very important type of coverage, which means that it is important to ensure that you choose the right plan when you take out this cover. For some people, the right choice means taking out more than one life insurance plan, as this enables them to enjoy increased coverage and provide even more financial protection and security for loved ones. Whilst having additional coverage and security is certainly not a bad thing, there are a few considerations that you should think about when it comes to taking out multiple life insurance plans. Some of the things to consider include:

• Managing multiple plans could be more difficult: Although having multiple life insurance plans in place does offer greater security and peace of mind, it can also cause more confusion and become more difficult to manage. The more life insurance plans you have the more time you will have to put into managing and reviewing them, so you should bear this in mind when considering multiple plans.
• The cost implications of multiple plans: Of course, life insurance does not come for free and if you take out a life insurance plan you will have to pay the specified premiums. By taking out multiple life insurance plans, therefore, you will have to meet premium payments for each plan that you have in place, which means that having multiple plans could prove costly.
• Time implications: When you take out multiple life insurance plans, you will have to dedicate more time not only to finding suitable plans and providers but also in terms of reviewing and checking your life insurance plans and coverage.

Multiple life insurance claims

Provided that the cause of claim satisfies the terms and conditions as laid out on each of the policy, there should be no reason why you cannot lodge your claims on multiple life insurance policies. However, it is important to remember that the eligibility of claim will be determined by each insurer, which may have their own specific set of rules and regulations in processing a claim.

Consult both insurers before you apply

This being said, it is essential to consult with the individual insurance providers (current and/or prospect) to get a clear understanding on whether or not you may be able to obtain additional life insurance policies. They will also be able to provide more information on what the implications may be if you currently already own multiple life insurance plans.

Consolidating (combining) multiple superannuation life insurance policies

It is completely normal for people to accumulate a number of superannuation funds as they move between jobs. Within these different superannuation funds, there may be a default level of life cover that has accumulated over time. Consolidating these multiple super life cover policies can bring a number of benefits:

• Less paperwork to manage.
• Less fees.
• More efficient investment strategy.

Is there a need for additional cover at different life stages?

While there are people who wait around until later in life before taking out life insurance cover, as well as people who do not bother taking out life insurance at all, there are people who take out cover earlier.

If you already have cover

It is important for anyone with life insurance coverage to review their needs on a regular basis, as these can change dramatically from when you initially take out your life insurance cover due to things such as:

• Changes in your job, health or financial circumstances
• Marriage
• Having children
• Buying a house

When you review your needs against the coverage you already have, you may find that you need to consider getting extra coverage and may therefore decide to take out another life insurance plan.

• When buying cover the first time

  Find out if it has 'guaranteed future insurability'. This means you can increase your cover without having to go through another medical exam when certain life events happen e.g. buying a house.

Alternatively, you may discover that you actually have too much cover in place and are able to save hundreds or thousands on your premium payments. Taking out multiple life insurance policies is perfectly acceptable and can actually provide increased peace of mind and protection for you and your loved ones. However, there are some things that you need to bear in mind if you are considering taking out multiple life insurance plans.

Can I nominate multiple life insurance beneficiaries?

Most insurance providers will allow you to nominate multiple recipients of your policy benefit, also known as beneficiaries, in the event of a life insurance claim. The typical life insurance beneficiaries are your partner/spouse and/or children, but can also be other family members, such as siblings or aging parents, business partner, or other individuals who are financially dependent on you or your estate. You can nominate up to five beneficiaries with most life insurance policies, although it may vary between providers.

You can split up what's paid to your beneficiaries

From there, you can then appoint the portion of cover amount (out of 100%), also known as percentage split, that you would like for your multiple life insurance beneficiaries to receive. You can nominate multiple life insurance beneficiaries on your application form, or through a separate beneficiaries nomination form. It is important to keep your nomination up-to-date should your personal circumstances change, such as in the event of a separation, divorce, or death, to ensure that the benefit does not end up with other entities other than your intended recipients.

What happens to my beneficiaries if I have a life insurance policy inside super?

If you hold a life insurance policy through a superannuation fund, the recipients of your benefit payout may not go to your selected beneficiaries. In the end, it is your super fund trustee who makes the decision on your life insurance benefit payout.

When a non-binding (or preferred) nomination is made, your trustee will determine which of your beneficiaries will receive the payout in the event of your death, however variations may occur depending on the situation at the time of death.

A binding nomination on your superannuation life insurance policy would ensure that the benefits goes to your intended recipients. This usually incurs a small annual fee to your super.

Why take out life insurance cover?

The insurance market has undergone rapid changes over the past twenty years and those looking for comprehensive coverage now have a complex network of different policies available to them. Life cover is not only designed to provide valuable peace of mind but also essential financial protection for your loved ones.

But I'm not going to die any time soon, right?

It's important to consider the position your family would be placed in if you were suddenly to pass away. How long would they be able to keep on top of mortgage repayments and everyday expenses? While some people think that it is okay to wait until they are older and nearer to a natural death before taking out life insurance, there are two key things to remember:

First off, as you get older you become more of a risk to insurance firms due to your age and health, so you will pay more for coverage.

Secondly, although we all hope to live a long and health life, you simply do not know when something will happen that leads to your untimely death, so waiting until you are older could mean that you are too late to provide your loved ones with this family.

Essential tips to avoid being over and underinsured

Whilst having multiple life insurance plans can mean more paperwork, it also offers the obvious benefit of providing more financial security for your loved ones. If have a policy and still feel that you may need a higher level of coverage, you can get an additional life insurance plan put into place rather than changing your existing coverage.

Taking the time to review your situation and policy needs can save you money in the long run as your circumstances are likely to change overtime.

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