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Ask the Life Insurance Expert

Can a person buy multiple life insurance policies with a single insurer?

Yes, you can buy multiple life insurance policies, and they can be from the same insurer or different insurers. For example, your situation might call for a permanent policy so that your beneficiaries receive a benefit no matter when you pass away and a term life policy to cover short-term debts.

Keep in mind that life insurers will want to know what other life policies you have; they don't want to sell you an additional policy if they believe you are applying for more coverage than you need.

So how much life insurance should you have?

Finding the answer requires doing some homework, including an inventory of your finances and a thorough consideration of how your beneficiaries would maintain their lifestyles without you, including future college education costs with inflation factored into the mix.

Avoid simplistic formulas, such as multiplying your income by seven or eight, calculating your future earnings or buying only enough insurance to cover your debts.

Most experts recommend doing a needs analysis, which can be broken down to this:

Short-term needs + long-term needs - resources = how much life insurance you need.

Short-term needs include all the immediate expenses your beneficiaries face when you die, such as medical and funeral costs, debts and outstanding taxes. Long-term needs include mortgage and college tuition and family maintenance expenses for the number of years you want to provide the income. Resources include savings, stocks, bonds, coverage you have through existing life insurance, such as through an employer's policy, and Social Security. (Don't count cars or your home as resources because selling them would hurt your family's lifestyle.)

Read more about calculating your life insurance needs, and use Insure.com's Life Insurance Needs Estimator Tool.

Last updated: Sep. 9, 2010