Why does the carrier care about my other policies?
The answer all comes down to loss and indemnity—how much you stand to lose vs. how much the insurance will cover. When you apply for any insurance policy, the insurer makes certain that the beneficiary does not stand to profit in the loss of the insured item or life, in other words, that the indemnity does not outweigh the loss.
In the event that a life insurance applicant already holds other life insurance policies or is already applying for other policies, it's possible that one or more of those other policies affects the indemnity-vs.-loss relationship between the beneficiary and insured of the new policy under application. For example, you might apply for insurance on your spouse's life, with yourself as beneficiary. If you are already beneficiary to a policy on his/her life, then the financial loss which his/her death would impose on you is already mitigated or possibly eliminated entirely. In that case, the insurance company that reviews your application will only sell you coverage up to the amount of financial loss that is not already protected against.
(In case you didn't know, a "life insurance carrier" is not a person who carries coverage but, rather, the company that issues life insurance coverage.)
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