Stacking Multiple Life Insurance Policies: Why Policy Stacking is a Good Idea & How to Do It

A frugal approach to your life insurance purchases is entirely possible.

Your life insurance needs are dependent on your financial obligations and goals. Commonly, your monetary requirements change over time.

By stacking multiple life insurance policies, you can likely save a large amount of money – while securing life insurance protection for different stages of your life.

Goal – Find out everything you need to know about stacking life insurance policies to decide if it’s a smart move for you.

Table Of Contents

What is Policy Stacking for Life Insurance?

For most, we have a larger financial need while we are younger, and perhaps raising a family or taking on a business venture. As life changes, say our children are out of the house or our mortgage is paid down, our life insurance needs change as well.

Below, we will explain the what, why, and how of life insurance policy stacking.

What is life insurance policy stacking?

What is Policy Stacking?

You can purchase multiple policies to:

  1. Vary (also called laddering life insurance) your amount of coverage for different stages of your life. Or
  2. Achieve a certain amount of coverage not available to you through one policy. For example:
    1. Multiple guarantee issue life insurance policies
    2. Multiple no exam life insurance (non-medical) policies

Why Would Someone Stack Life Insurance Policies?

You can potentially save a significant amount of money by strategically purchasing multiple life insurance policies. Or, you can secure a larger amount of coverage that may be unavailable through one particular policy.

How Can I Stack Life Insurance?

Collaborate with an independent life insurance agent to assess your financial protection needs during different stages of your life.

Determine how much coverage you need, and for how long you need it. Purchase multiple policies (3 policies are commonly purchased for policy stacking).

5 Ways Stacking Life Insurance Policies is a Perfect Idea

Below, we will cover 5 reasons why stacking your life insurance policies is a good idea.

5 ways stacking life insurance policies is a good idea

1. You Can Save Significant Money

A primary reason to stack life insurance policies is the savings you incur.

Let’s compare purchasing one policy vs. policy stacking.

Cost analysis for life insurance policy stacking
Quotes are samples only. Subject to change.

In our example, close to $28,000 is saved over the life of the policies. 

To put our example another way, for the first 10 years, the same amount of life insurance coverage is in place ($2,000,000) and our monthly cost looks like this:

  • Stacking life insurance policies: $73.60/mo
  • Single policy: $126.88/mo

2. You Are a Smart Shopper

By taking a few extra steps to gauge how much life insurance coverage you need now and in the future, not only are you demonstrating frugality, but also financial intelligence.

In other words, thousands of dollars can be saved if you know how much money you will need to protect your loved ones, now and further into the future.

3. Evaluating Your Finances is a Worthwhile Task

The process of establishing a policy stacking strategy requires you to assess your financial needs. That’s time well-spent.

As a guideline, take notes on the following possible monetary commitments:

Current Needs:

  1. Mortgage
  2. Living expenses (food, utilities)
  3. Loans (student, car, business)
  4. Debts (credit card)
  5. Childcare

Later Needs:

  1. Living expenses
  2. College tuition
  3. Charitable gift

Future Needs:

  1. Living expenses
  2. Charitable gift
  3. End-of-life expenses (medical, funeral)
  4. Estate

4. Stacking Policies Gives You Options

Should your financial needs change over your lifetime (and they often do), you have policy options.

For example:

  • Many times, you can convert your term life insurance policy into a permanent policy, if you determine you need permanent financial protection.
  • If your policy is no longer needed, you can cancel it.

5. An Independent Life Insurance Agent is a Must

What is an independent agent? A life insurance agent who can represent multiple carriers.

Why are independent agents important? Independent agents are not held captive to a particular carrier. They have your best interest in mind and will shop multiple carriers and policies to find the highest quality policy at the most competitive price.

Policy stacking, or laddering life insurance, typically requires an independent agent because policies are often purchased from different life insurance companies.

Bottom Line: By stacking life insurance policies, you are securing coverage for the various stages of your life. Money is saved and you prevent over insurance.

What Are Some Examples of Policy Stacking?

1. Jane Stacks 3 Term Life Policies

Jane, 44, has 3 children, ages 10, 14, and 16. She works full-time (note: stay-at-home moms need life insurance, too) and wants to secure adequate financial protection. She has a few needs:

  1. Financially protect her children until they reach adulthood
  2. Be able to pay off her mortgage and loans
  3. Provide enough money for long-term living expenses for her spouse

Jane decides to stack life insurance policies:

  1. $500,000 for 10 years, to cover the time that she will be raising her children
  2. $300,000 for 20 years, to pay off her mortgage balance and student loans
  3. $100,000 for 30 years, to cover long-term living expenses

For the first 10 years, Jane has $800,000 in coverage, during the time that she would need financial protection the most.

Gradually over the next 20 years, she maintains $400,000 in coverage, and finally $100,000 in coverage into retirement.

2. Joe Stacks Term & Whole Life Insurance

Joe, 37 years, is a new dad with a 6-month-old and hopes to financially protect his new family. His needs include:

  1. Secure adequate protection for his child through college
  2. Pay off his business loan and mortgage
  3. Purchase a small permanent policy for end-of-life costs

Joe uses the policy stacking strategy:

  1. $750,000 for 20 years, to financially protect his child
  2. $500,000 for 10 years, to pay off his mortgage balance and business loan
  3. $100,000 permanent policy, to cover funeral expenses

Joe and Jane save significant money using by stacking insurance policies. They secure coverage for the different stages of their lives and adequately protect those they care about most.

3 Problems with Life Insurance Policy Stacking

While stacking life insurance has many perks, there are a few considerations to take in before moving forward.

Problem #1: Purchasing Process Can Be Lengthy

For sure, purchasing multiple life insurance policies is more tedious than purchasing one. The application, interview, possible medical exam, and the waiting can be cumbersome.

Consider checking out no physical life insurance companies to bypass the medical exam (premium rates are competitive in many circumstances) – and save you time and effort.

Problem #2: Annual Fees And Maintenance Add Up

Likely, each of your life insurance policies will have an annual fee. It will cost a little more each year for you to maintain multiple policies.

However, a modest annual fee is a good tradeoff for the amount you can save over the life of your life insurance policies.

Also, you will need to keep multiple sets of paperwork organized. In addition, your estate may be more complicated with more than one life insurance policy.

Problem #3: We Can’t Predict the Future

While we can be studious and diligent in our financial planning, we will never quite know what the future holds.

Purchasing multiple policies now will likely secure financial protection for your future. Yet, major life events do happen and your life insurance purchases may need to be adjusted accordingly.

How to Purchase and Stack Life Insurance Policies

There are two things you need to do to stack life insurance policies:

  1. Partner up. Collaborate with an independent agent (that’s us) to find the best policies to fit your needs at the most competitive price. When purchasing multiple policies, it’s important to have access to different life insurance carriers. No company is created the same and you will want options – for policies and pricing.
  2. Prepare. Be sure to have your important information ready. Your basic information (date of birth, address, etc.), medical history, occupation, and lifestyle information are needed during the application process.

To get started, simply fill out our instant quote.