When it comes to life insurance, many wonder if they can split their coverage among multiple insurers. Perhaps you feel safer diversifying your policies rather than relying on just one provider. The good news? You can have life insurance policies with as many insurers as you like. However, approval for each policy isn’t guaranteed, and here’s why.
Understanding ‘Overinsurance’
Every time you apply for a life insurance policy, the insurer will ask:
- Do you have existing life cover?
- How much is your current cover?
- Which companies are you insured with?
These questions help insurers assess whether you might be “overinsured.” Here’s an example to illustrate this:
- John earns R20,000 per month.
- He has R2,000,000 life cover with Company X and another R2,000,000 with Company Y.
- Now, John applies for R4,000,000 life cover with Company Z.
Company Z might question why John needs R8,000,000 in total life cover. They’ll ask him to justify this amount before even considering his application.
Why Insurers Set Limits
Life insurers need to ensure that policyholders aren’t taking out excessive coverage for unjustified reasons. Large policies carry risks, including the potential for fraud or harm with the intention of benefiting the policy’s beneficiaries. Insurers mitigate this by capping coverage based on reasonable financial needs.
Can You Have Multiple Policies?
Yes, you can split your life insurance among several companies if it makes you feel more secure. However, insurers will collectively evaluate the total coverage you’re applying for.
Tips for Getting the Right Coverage
- Calculate Your Needs:
Determine how much life cover you realistically need to protect your loved ones. - Compare Quotes:
Shop around to find the best rates and terms that suit your situation. - Avoid Overinsurance:
Stick to a reasonable coverage amount to ensure your applications are approved.
Diversifying your life insurance policies can offer peace of mind, but it’s essential to understand the limits and justify your needs. Plan wisely and make informed decisions to secure your family’s future.
This article has been prepared for information purposes only and it does not constitute legal, financial, or medical advice. The publication, journalist, and companies or individuals providing commentary cannot be held liable in any way. Readers are advised to seek legal, financial, or medical advice where appropriate.