What happens if a job offers life insurance as a benefit but you already have it?

confusedmummy

I have private/personal life insurance which I have had for the past approx 5 years which will pay out a lump sum on death. I am happy with this policy and find the yearly premiums reasonable.

I have been offered a job and one of the benefits is life insurance/health cover.

The question I have is whether it is possible to have 2 life insurance policies and in the event of my death, would they both pay out or would only one pay out and if so, which one?

I obviously do not want to cancel the one I currently have as if I were to lose/leave my job I would have to get life insurance all over again. I also do not want the life insurance through my job to negate the older life insurance policy as it might pay out less than the older policy.

Can anyone explain what happens in such circumstances? Thank you.

spadoosh

Youre allowed as many insurance policies as youre willing to pay for. If theyre the same provider theyll probbaly want to speak to you to clarify a few things to ensure youre getting the correct coverage.

I dont believe they can cancel each other out.

Aretnap

It's perfectly possible, indeed fairly normal, to have more than one life insurance policy. I have three - one which I took out when I bought my house, another which I took out when I had a child and needed some extra cover, and a third provided by my work. In the event of my premature death all three would pay out the full insured amount.

Life insurance differs from most other types of insurance in that it most insurance policies are designed to put right a specific loss. For example, if you crash your car, your car insurance will only pay out up to the value of your car, and if you have two car policies each will only pay out half the value. If it were otherwise we'd all be tempted to insure our cars twice, crash them, and collect a pile of money.

On the other hand very few people are going to deliberately die in order to collect a life insurance payout - so you can insure your life for as much or as little as you like, and the insurers aren't particularly worried about how you justify the figure you've insured yourself for. And as there's no limit on what you cav cover yourself for, there's no reason why you can't have and claim on multiple policies.

You're correct that it's worth hanging on to your current policy. If you cancel now and then lose your job somewhere down the line you run the risk that your health will have got worse in the meantime - and that could potentially make getting a new policy difficult and/or expensive. So I've always ensured that my own cover is enough to provide for my family, and treated the work policy as a bonus.

confusedmummy

Thanks for your replies. The reason I asked was that the broker who did my original policy said that with certain insurances the insurance company will not pay the full sum if there is a co-existing policy as they would consider me "covered" up to the sum by the other policy (if that makes sense)? I think they might have been talking about Income Protection insurance or Critical Injury insurance which I believe does work in a different way if you have more than one policy.

stator

Yes, when insuring things that are worth a certain amount of money like your house or car they won't allow you to 'over insure' but your life isn't worth anything specific so you should be able to insure it for as much as you like.

They won't let your go above a certain limit for income protection because they don't ever want you to be in a situation where you would be better off getting injured or unemployed, it creates a moral hazard. They always want you to take whatever action you can to avoid needing to make a claim. If you get get 75% of your income if you were in a work place accident, you might get a bit sloppy with H&S