Quora Answer: Is It a Smart Move to Have Multiple Life Insurance Policies for Myself for the Family?

The following is my answer to a Quora question: “Is it a smart move to have multiple life insurance policies for myself for the family?” 

This depends on a few factors.  Firstly, what sort of life coverage do you have?  Only death benefit?  Does it have terminal illness, critical illness, early payor benefit, disability?  Does the death benefit have special provisions for accidental death?  What about self-harm and suicide?  Is the coverage limited by region, or is it international?  Are there exceptions for certain occupations or activities?  If you have any or all of these, do you actually need it? 

Secondly, there are limits to how much coverage you can take on your life.  In Singapore, insurers generally accept a maximum of $6 million for death benefit, and $3 million for disability, although this may vary.  You could ask for that limit to be raised, but that would require special underwriting, and you have to prove you are worth that much.  This means, if you were to decline disclosing prior coverage, and actually have more than the limit, you can only claim up to that limit.  Or the insurer may decline to payout for non-disclosure, and return your premiums less costs to the estate. 

In general, when you get coverage, you should undergo a financial health review process, and obtain coverage that is suitable.  If budget is not a constraint, you want enough that your family has enough to maintain their standard of living upon your death, until they are able to adjust to that loss of income, if you are the primary provider.  Death is an event.  If the coverage is for critical illness, you are likely to survive for years.  There is a likely loss of more than one income in the family, because your spouse or others have to put aside time to care for you, and that is even with the cost of getting help such as a home-based nurse or maid.  If it is disability, you have that, and you could live two decades in that state.  The coverage you need in such a case is likely up to ten times the income you need to protect. 

In such a case, it would be prudent to break it up across a few policies.  Whole life policies have a value, and may function as financial instruments.  In the event that you have problems with your income, you have options such as dropping a policy, taking a premium loan for one or two of them, or halting coverage for a period of time without dropping the policy.  More policies mean more options.