Can I have multiple life insurance policies?

By AAMI 09 March 2022

Life insurance should always be designed to best suit your circumstances and preferences. Before you establish which policy and level of cover you need, and whether you want to invest in any additional life insurance policies, it’s important to get familiar with the four main types of life insurance:

Life insurance (in case of death)

While all four of these insurances fall under the ‘life insurance’ category, this is the one that probably springs to mind first - insurance that protects your family by offering your loved ones a lump sum upon your death or, in some cases, diagnosis with a terminal illness.

Total Permanent Disability (TPD) insurance

TPD insurance will provide you with a lump sum if an illness or accident leaves you permanently disabled and unable to continue working. It helps to cover lost income as well as rehabilitation expenses.

Critical illness or trauma insurance

This will cover you for certain types of serious illness that usually require lengthy or expensive recovery - for example heart attack or stroke. Often people will use the payout from this type of insurance to cover medical bills and help to get themselves back on track as quickly as possible.

Income protection insurance

Income protection insurance provides monthly payments intended to cover lost income due to illness or injury. Many people use these payments to keep up with regular expenses and repayments such as mortgages or utilities.

Is there a benefit to having more than one life insurance policy?

The best life insurance solution is the one that suits you - for some people this is one policy and for others it’s multiple. In Australia it’s possible to hold multiple life insurance policies, and this is actually more common than you might imagine. Life insurance is often included as part of your superannuation and many people still hold multiple super accounts, despite recent efforts by the government to encourage consolidation. Even if you already have a degree of life insurance cover through your super , you might choose to take out additional cover to make up for any gaps in your existing policy, or to increase the level of cover to ensure any payouts would be sufficient for your family. Some policy types may be better suited to certain individuals due to their personal circumstances, like age, family, and employment type.

Can you claim on multiple life insurance policies?

It’s possible to claim on multiple policies, provided you remain within the terms and conditions of each one. If you’re intending to purchase more than one life insurance policy, be sure to read through the rules in detail to avoid disappointment or complication further down the line. You might wish to enlist the help of an expert adviser to put together a solution that works for you and that remains within guidelines.

What to think about when taking out multiple life insurance policies

The first thing to establish is what you already have - check your super account to understand what level of life insurance cover your fund offers, and what you have signed up to as part of your package. Crucially, don’t assume that any insurance through your super will still be valid, particularly if you haven’t made a recent contribution to the fund. After government decisions taken in 2020, insurance on funds that have been inactive for 16 months will be cancelled, and new super clients under the age of 25 will no longer be offered life insurance as part of their account. If you find you have multiple super funds, you could also take the opportunity to consolidate your accounts if it suits your situation - doing so will often result in a reduction in insurance premiums and fees.

Next, figure out whether what you’ve got is enough to give you peace of mind. Would your current level of cover be sufficient should the worst happen, and are there any significant gaps that need to be addressed? If there are gaps then would these be better addressed by a new policy or an extension of your existing cover? Remember that taking out multiple life insurance policies could also result in higher premiums, or multiple sets of fees, so being mindful of how these fit into your budget, and weighing up costs against benefits will be important when deciding what your cover should look like.

Finally, consider the term on your life insurance solutions. Multiple policies could help to fill gaps where terms come to an end. Having a holistic view of your life insurance could help you to make a decision that works for you.

To discuss life insurance policies, head to the AAMI Life website, get a quick quote, or contact us today on 1300 407 322.