Can you have multiple life insurance policies?

Can you have multiple life insurance policies?

Yes, you can have multiple life insurance policies in Australia. You may very well have two without even knowing it, as most super funds provide automatic or default life cover. If you already have a direct life insurance policy and two superannuation accounts (that haven’t been consolidated), you may unintentionally have three life insurance policies in place.

Depending on your age and monetary balance of your super account, however, you may not be automatically covered by life insurance. Super funds must now cancel life insurance on accounts that haven’t received contributions for the last 16 months or with balances under $6,000. Life insurance is now only provided on an opt-in basis for new super fund members under 25 years old (unless you work in a dangerous job).

As superannuation and life insurance can be a complex topic, it’s often recommended that you obtain professional financial advice before you make any major decisions.

What are the benefits to having multiple life insurance policies?

Having multiple life insurance policies may help you cover any missing gaps in your coverage (i.e. taking out trauma insurance which is no longer offered through super) and provide better financial protections for your loved ones.

A life insurance policy through your super fund alone generally provides a lower level of cover than what you can get outside of super, according to the Federal Government’s Moneysmart website. Cover can also end if your super contributions stop or your super becomes inactive, as well as total and permanent disability (TPD) and life cover usually ending when you reach the ages of 65 and 70 respectively. Having another policy outside of super could help you keep consistent coverage, giving you some peace of mind.

That said, the main benefits of having multiple life insurance policies are:

• Better flexibility and choice over your cover, including the cover amount, level of cover, cover term and type of cover (e.g. income protection, TPD insurance, trauma insurance)

• Potential discounts and opportunities to save if you purchase through the same provider

• You could take advantage of life insurance through super’s default coverage, which often doesn’t require a health assessment in order to be covered

• Accessing different health rewards and benefits programs from different providers

• You could have different life insurance policies for different beneficiaries and/or purposes

• You may be able to find the best value (price and terms and conditions) for each type of coverage, as opposed to bundling them with one provider

• More of a say over how your premiums may be charged (e.g. stepped or level premiums)

• Some policies may be easier to add to or change as you go through different life stages

Before applying for any additional life insurance policies though, check with your current provider to see whether this will impact your existing policy. Some providers may apply the maximum cover amount to both policies if you take out two life insurance policies with them. This may result in your provider needing to reduce your cover so that you don’t exceed the maximum limit. If this happens, your provider will typically apply this to the most recently issued policy and refund the premiums you paid on the amount that exceeded the limit.

If you’re considering a supplementary policy outside of your super, you can compare life insurance with Canstar. It’s important to read any relevant policy documentation, such as the Product Disclosure Statement (PDS) and Target Market Determination (TMD), for any policy you’re considering.

Compare Direct Life Insurance

What are the drawbacks to having multiple life insurance policies?

Although you may have more comprehensive coverage with multiple life insurance policies, you’ll ultimately be paying two or more sets of premiums. These extra premiums could be eating into your take home pay (if you have a direct life insurance policy) or your superannuation balance. This could especially be true if you have multiple superannuation accounts that have not been consolidated. You’ll also usually be paying general superannuation fees on each super account, so it’ll likely be worth considering consolidating your super (if that’s suitable for your needs).

It’s worth checking each of your life insurance policies to ensure that you’re not unintentionally paying twice for a similar form of coverage. You may also be offered a discount by a life insurance provider when applying for a large amount of coverage or when bundling your coverage together.

That said, the main drawbacks of having multiple life insurance policies are:

• More complex when it comes time to make a claim, as you may need to fill out additional forms and provide extra medical reports

• You may miss out on discounts for larger insured amounts or combined policies

• Extra premiums and potentially extra policy administration fees

• You may need to supply more medical information (i.e. blood tests) as part of a policy assessment—this is usually the case for direct life insurance policies

• You may end up being overinsured and have multiple forms of coverage for the same thing

• You may forget the details of your policies and not disclose existing coverage, which could impact the validity of policies you take out later

Can you claim on more than one life insurance policy?

Yes, you can generally claim on more than one life insurance policy—provided you meet the terms and conditions of each provider. You may face complications, however, if the insurance policies through your super are not independent from one another, as income protection and TPD insurance are usually treated separately. This may impact certain super funds’ insurance payments under certain circumstances.

It’s a good idea to read the PDS for each of your policies or get in touch with your providers directly to confirm whether or not you’d be able to claim on more than one policy for the same insured event.

Can you have more than one income protection insurance policy?

Yes, you can generally hold more than one income protection insurance policy at the same time. Most income protection policies include offset clauses, however, which means you generally can’t receive more than 70% of your regular income across all policies combined. These clauses are designed to prevent people from claiming more than their regular income and incentivise them to eventually return to work.

That being said, you could potentially structure multiple income protection policies to give you more comprehensive coverage. For example, you may have a policy through your super fund that has a 30-day waiting period and a two year benefit period, as well as a retail income protection policy that has a two year waiting period but pays benefits through to age 65.

It’s worth checking the PDS for each of your income protection policies or contacting each provider directly to better understand the waiting and benefit periods and total benefit limits that apply to each policy.

Compare Income Protection Insurance