Living a covered life is always better than living without any coverage. But knowing how our financial needs change and grow, you might be asking yourself if a life insurance policy should suffice.
Is more always better when it comes to coverage? Let’s find out.
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Should you buy an additional life insurance policy?
There is no concrete answer to whether you should or should not buy an additional policy. However, the concept of income multiplier can guide you in making the decision. This is a valuation tool in determining how a policyholder needs to secure his future financially.
In essence, this is also the money you need so your loved ones would live a more comfortable life if you die. There is no hard rule to this, but people aged 40 and below need between 30 and 35 times their annual income, but 71 and above need up to five times their yearly income.
As such, if you are 30 years old and your policy doesn’t cover this, you might as well obtain a second life insurance product.
Things to remember when buying additional life insurance
If a different policy makes the most sense to you, here are the things to consider when applying for new insurance.
1) Divulge active policies
Policyholders are required to disclose information on current policies. This information is vital in qualifying you for an additional policy.
For instance, the insurance company can determine if you have an appropriate amount of insurance and recommend the right amount if it is inadequate. Further, they will know if the amount of coverage you are applying for is appropriate and tell you why it is or not.
This works both ways一it is either you set the amount to be verified or the policy company would recommend the amount to you for your review and approval.
2) Complete the financial verification
Additional documentation is required, such as tax documents. In addition, insurance companies require financial verification, particularly for policies with higher amounts.
Additionally, the insurer needs to confirm your active policies and your lifestyle to justify the amount you are applying for or the amount they would recommend.
3) Complete tests and other requirements
Depending on your age and overall health status, the insurance application process would still require the completion of medical examinations. Additionally, for higher amounts, the policy company would ask for particular medical tests.
Bottom-line
A relevant practice for every policyholder is to assess the coverage regularly. This allows determining if he needs to make any adjustments to the existing active policies. Remember that life and finances evolve, and so should life insurance coverage.
Don’t rush the process, though. Instead, discuss your unique circumstances with your insurance agent. Other than you, he would also know whether you need an additional policy or not. An insurance agent would proactively recommend additional coverage, more so when there are significant life changes such as purchasing a new house or the arrival of a new family member. As such, it pays to have open and constant communication with your agent.
Most importantly, if not an additional life insurance policy, he would recommend strategies to improve coverage on your present active policies. Thus, you need not buy a new one and undergo the underwriting process again, but still obtain the coverage you need.
