A reader named Sandra recently wrote in with a question about buying life insurance. Here’s what she asked:
I have a life insurance question. I am looking for life insurance for my husband and me. I understand everything about how to purchase it and ways to choose which is best for you, but I have never heard or read where anyone tells you if everybody in the family should have it all at one company. My husband smokes, so it will cost more for him to have a policy where I have mine. Is it okay to have our policies with different companies if we’ll get a better rate?
The short answer is that it doesn’t really matter. In fact, back when I first wrote about saving money on life insurance, one of the tips that I shared was to shop around. This goes double when you’re looking for two policies. The easiest way to get the lay of the land is to use a life insurance comparison engine.
Assuming that both are financially sound, the only downside to having policies with two companies is that you’ll have to keep track of payments to both of them. Based on personal experience, however, this isn’t a huge deal…
My wife and I actually have term policies from the same company. Even though we initiated the underwriting process at the same time, however, our policies ended up being issued a few weeks apart, and we get separate bills for them — similar to what would happen if we had purchased from different companies.
In our case, the same company offered the lowest life insurance premiums for both of us, so it was a no-brainer to go with them. But if there had been an appreciable price difference, we wouldn’t have thought twice…
It would’ve been two companies for us!
2 Responses to “Buying Life Insurance: One Company or Two?”
My wife and I have life insurance from 2 different companies (Prudential and West Coast Life). We simply could get the best deal by shopping separately. I’m 12 years older than my wife so that probably had something to do with it.
My wife and I each split our policies between two companies (four total policies, same two companies for each of us). That provides some diversification in the event of an insurance company failure. That’s admittedly very unlikely, but 30 years is a long time. It’s not as important that we diversify between us because that would only matter if we both died around the same time.
The other reason to have two policies is because 20 years from now I should have a much bigger nest-egg and will need less insurance. With two policies of different terms, I have double the insurance for the first 20 years, after which one of the two policies will remain in force.
Add to this that different companies have different rates for different terms, and it makes sense to shop around separately for each term.
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