Multiple Life Insurance Policies

Recently there has been an increase of questions around people having more than one life insurance policy and then claiming on them. We’d like to put your minds at ease by answering your most prevalent questions.

Published June 9, 2020

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Life insurance companies in Australia generally do not have any restrictions when it comes to purchasing multiple life insurance policies.

However, the amount of cover must be justified and you have to clearly disclose all existing policy information when completing the subsequent application forms.

Can you have more than one life insurance policy?

Yes, as long as you aren’t over-insured. For example, a top-up policy on a group policy in your super fund or another policy with additional types of cover i.e. Trauma Cover is acceptable. Be aware that income protection policies have built-in offset clauses, meaning you can generally only insure up to 75% of your salary.

The reason behind these offset clauses is to prevent you from taking out two policies and trying to claim on more than a 100% of your policy. The intention here is to provide you with a maximum benefit of 75% of your salary (pre-disablement income) because if you were to receive more than your salary, you would not be motivated to go back to work.

You can, however, have two Income Protection policies that have complimentary waiting and benefit periods. For example, you might have an Income Protection policy in your super fund (salary continuance) that has a 30 day waiting period and a two-year benefit period complimented by another Income Protection policy, this one with a two year wait period for which the benefit pays out until your 65th birthday

Can you have multiple life insurance policies on one person?

Yes, you can have multiple life insurance policies on one person. An example of this is a top-up policy on a group policy or another policy with additional types of cover i.e. Trauma Cover. This is totally acceptable however be aware that income protection policies have built-in offset clauses, meaning only up to 75% of your salary can generally be insured.

It’s important to note that each insurer has their own underwriting guidelines on the maximum level of cover they will offer for a policy, as well as the maximum sum insured of all policies held in one person’s life based on what their financial position can justify.

Justification is done by demonstrating to the underwriter (person reviewing your application) the person’s liabilities plus other financial obligations (i.e., kids) less your assets justify your collective sum insured of all the policies you currently have in place. The fact that you can afford the premiums doesn’t mean you can financially justify a higher level of cover.

The insurance application will ask you if you have any existing policies on your life. It is vital that you answer this question honestly and accurately. If you do not disclose this information your application might be denied or worse your future claim might be declined.

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Can you claim on multiple life insurance policies?

Yes, you can claim on multiple life insurance policies where you have complied with your duty of disclosure and disclosed this in every subsequent life insurance application form that you have an existing policy and the fact you are maintaining the existing policy as well as taking out an additional policy.

When claiming on more than one policy, you’ll need to complete a claim form for each company separately, and they will generally ask you to list every insurer you’re claiming from. However, if you have complied with the above, you shouldn’t have any issues with claiming on multiple life insurance policies.

For further clarification regarding claiming on multiple life insurance policies, we recommend you review the particular product disclosure statement of the multiple policies you are considering holding at the same time. If you are still unsure about taking out a new or added policy, request a quote, and we’ll provide you with the guidance you need.

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