Insurance Agent Forum

[Johnny180]

I'm preparing to get licensed and enter the life & health insurance field. Just wondering if there is any prohibition against a person purchasing a life insuarance policy with more than one insurer at a time. This issue is not addressed anywhere in the study material for the licensing exam. I've heard various things based on second and third hand information, but would like to get a straight answer from a real professional in the field. Thanks.

[djs]

You can have as many as you like, from as many carriers as you like. No restrictions on this, except.....

As a rule, life insurance companies will not 'overinsure' a life. There is a financial underwriting component to this, meaning someone making $30K a year probably doesn't need $5,000,000 in life insurance, and if he asks for it, it will get turned down (unless there is a separate reason why he needs it that can justify it). An applicant is required to list other life policies they have, so it is the total amount they look at, not the individual policy.

A few other caveats:
Medical requirements tend to be based on where you are at in total amount of life insurance, not the face amount of the single policy. If you start dealing in $1M + policies, this can come back to haunt you.

Insurance companies are always concerned about potential fraud. If a person is in a financial situation, adding life insurance is a big sign of fraud. Expect these to be turned down.

Low face amount policies are usually not very heavily scrutinized for financial risk, but may be if there is reason to suspect something fishy.

So, in short, no, there is no reason why a person can't have as many carriers as they want. Once you start crossing 20 times earnings (varies by age, carrier, face amount, and total coverage), you'll have more paperwork to do.

Dan

[Dave020]

And to follow up on djs, there is dis-incentive to purchase life insurance that way, especially term life. Carriers have break points on death benefit amounts that lower the per $1000 amount of premium. For example, it may cost $.25 per $1000 up to $250k then drop to $.21 per $1000 up to $500k and so on. If someone purchases four $250k policies from four different carriers, they may be paying more in premium instead of buying the $1M of coverage from one carrier for say $.18 per $1000 because of the breakpoint.

[Johnny180]

Is there a database that the life insurers check to see if you have policies with other companies? If you don't disclose other policies, then the insured dies, and the company discovers that there were other policies, what happens? Is that deemed to be a material misrepresentation that voids the policy or what? Frankly, if one has an insurable interest, pays the premiums and there is no fraud involved, I don't understand why one can't be allowed to have as much insurance as one wants regardless of financial wealth. Also, are there clauses in some life insurance policies that speak to the existence or non-existence of other insurance??? Thanks.

[Cenla Agent]

There has to be an insurable interest. Also, having too much insurance could create what I think is termed a "moral hazard" i.e. being worth more dead than alive... I remember these being stressed when I was studying for my license.

[LGilmore]

"I don't understand why one can't be allowed to have as much insurance as one wants regardless of financial wealth."

It's called getting a friendly call in the morning to see if the policy is two years old yet, and getting another call from a police chaplain about 3 hours later, when they discover the body... (true story, happened to me)

People when pressed can and will do some incredibly bad things, thinking they are saving their family as the death benefit can look pretty big if your under stress and not yourself.