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, especially with the ASIC 498 report revealing a multitude of claims being declined. We’d like to put your minds at ease by answering your most prevalent questions.

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.

Published: December 5, 2017
  • Transferring a Life Insurance Policy

    When life changes you might consider transferring your life insurance policy to another entity for tax, premium funding, family planning or other reasons to suit your new requirements.

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  • Angela May |

    I have three superannuation funds, all with life cover included. – Colonial Mutual, REIV and REST

    As I did not qualify for any other life insurance I have always thought that these would all pay out if I was to become deceased.

    While discussing this with a friend recently, she intimated that my estate may only be able to receive proceeds from one of these.

    Would love this clarified.

      Russell |

      Hi Angela,

      There is a huge misconception that you cannot have multiple life insurance policies in Australia however in general this is not true (excluding income protection – where this may be the case) however I would do two things to be certain.

      Firstly I would contact your superfund, and ask them to explain and send you a copy of the latest PDS for that covers your life insurance cover and ask them to confirm if it would present a problem with you having multiple policies and ask them to highlight the pages that cover exclusions and limitations. While I did review one of the PDS’s which did allow for multiple policies it would be best for you to contact them each provider and confirm and to get a copy of the latest Product Disclosure Statement for your records.

      Secondly group life insurance policies provided by superfunds are generally not guaranteed renewable which means that the REST, REIV or Colonial Mutual group policies terms and conditions can be downgraded at any time. Therefore while they may allow you to hold multiple policies today they may not in the future. Therefore you would want to review any alterations to the product terms and conditions as and when they happen or to review these on a yearly basis to ensure that they still allow you to have multiple policies at that time.

      If you need further assistance please give us a call.

  • Cathy David |

    Hi, I have death cover with two superannuation funds. My understanding is that if I passed away my dependants or estate would be entitled to receive proceeds from both funds. However, the underwriter happens to be the same insurer for both funds – can this affect whether both are paid out?

      Russell |

      Hi Cathy

      Great question, in general where both polices have been fully underwritten and you have disclosed to the insurer / underwriter that you have multiple polices. They will generally both pay out.

      However group policies are generally not underwritten at application time, therefore you will need to check the PDS / Policy Documents to ensure holding multiple death cover is permitted according to the policy of both funds. Most will allow you to but important to check.

      Secondly important to note that group policies offered through superannuation funds are not Guaranteed Renewable contracts therefore from time to time the insurer may change the terms and conditions of the policy that could prohibit you from claiming on multiple death cover benefits in the future?

  • Wayne Mackenzie |

    I had life/ TPD and IP insurance with my Superfund. However, I have ceased this given I am covered under my home insurance policy and felt paying for 2 was a waste. The amount my Superfund covered me for was minimal compared to my home loan insurance. Was this wise?

      Anneke |

      Hi, Wayne.

      Thank you for your question.

      As I am not aware of your personal circumstances, I can’t tell you whether cancelling your TPD and IP taken through your Superfund was a good idea or not.

      However, it’s important that you understand the features, benefits and terms and conditions of your policy, whether purchased through Super or an external provider to determine if it meets your specific requirements.

      If you would like to discuss the pros and cons of holding your policy inside vs outside your Super in more detail please contact us.

  • Tony |

    I am currently in the process of sorting out insurances for my family. I sought out some guidance from a financial planner recently and would like to get some clarifications if possible.

    Quick background. My current super fund will only fund me up to $800,000 for life and TPD insurance so it has been recommended I then take out an additional $2 million in cover separately to ensure I have adequate cover.

    My wife, on the other hand, is through another super fund that apparently will cover her up to $2 million in cover as required.

    My question is, is there a reason I can’t take out the recommended cover through the same super fund as my wife if they will give me the recommended amount?
    Thanks in advance.

      Anneke |

      Hello TJ.
      Thanks for your question.

      You can generally change your super fund anytime, using superannuation rollovers. However, before doing so you might want to first inquire whether you wife’s super fund will provide you the $2 million cover you’re seeking. The fund might require additional information for such a high sum insured, for example, how high-risk your occupation, your age and your general health.

      On the other hand, purchasing an individual life and TPD policy outside your super has its own benefits, including the ability to customise your cover, choosing your ownership structure and the ability to include critical illness insurance.

      Please feel free to give us a call and specialist will assist you in making an informed decision.

  • Ellen Shaw |

    I have two funeral policies. Do both payout upon my death? If not, then I don’t want to be paying for two if only one will be covered. Thanks.

      Anneke |

      Hello Ellen.
      You are generally allowed to have multiple funeral insurance policies. However, the total amount of cover you purchase is usually limited to $15,000.

      Also make sure the underlying insurer of each policy is different because if you have more than one policy from the same underlying insurer, chances are they’ll have a clause stating the maximum amount payable when you lodge a claim.

      If you’d like a specialist to assist you in reviewing your policies, please give us a call on 1300 135 205.

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