Life Insurance Blog

The term multiple coverage insurance can have several meanings. It can refer to life insurance policies that cover several people rather than one, for example, two parents within a household or a small group of employees with a micro-business. However, another meaning for the term is one person who carries more than one plan with overlapping benefits, either life, health, or auto insurance.
In the sense of one plan for several people, multiple coverage plans can cut costs, which is attractive and sometimes mandatory for households and micro-businesses alike. As these plans have lower marketing and administrative costs than individual life insurance policies, a number of smaller insurance providers offer multiple coverage plans. However, these policies tend to be less flexible than single coverage plans.

Multiple coverage plans can be a good idea in a household where one spouse earns considerably more than the other, who perhaps isn’t covered by an employer-purchased policy or any policy at all. In these cases, as there will be expenses if either spouse dies or is disabled, a multiple coverage plan may be the best affordable option.

The other meaning for multiple coverage refers to one person who has several policies in one category, such as life insurance. This form of multiple coverage can be quite common, as people tend to purchase additional insurance as the circumstances of their lives change. For example, the birth of a child often prompts the parents to purchase additional coverage, to ensure the child’s care should either parent or both die or become disabled. The need for any existing policies hasn’t changed, e.g., to cover burial expenses or provide for the surviving spouse, and so those policies remain intact, as well.

Multiple coverage and overlapping benefits can be a problem with some forms of insurance policies, for example, with cars, houses, or medical insurance, because such policies generally cover certain things rather than pay out a monetary amount. Although such issues are considerably less troublesome for life insurance policies, some overlapping benefits issues do exist.

For example, a person may have multiple life insurance policies, each with an agreement to cover funeral costs up to a certain amount. In such a case, only one policy is likely to pay out, rather than all of them.

However, if cash is to be paid on death or disability, then there is no real problem with multiple coverage, as the named beneficiaries will be paid that amount no matter what other life insurance policies the policy holder has. However, there can be problems with tax deductions on payments, particularly if one of these policies is in a superannuation scheme.