Life Insurance Options for Married Couples
Traditionally, life insurance has been intended to help the remaining spouse financially in the event of the breadwinner’s death. That’s changing, however, with a growing number of life insurance policies being purchased by both members of a couple.
Why Get Life Insurance?
Life insurance policies are purchased to assist wherever it would be needed most upon the death of the policy holder.
Common reasons for buying a life insurance policy include:
- To pay off the mortgage
- To pay for the children’s higher educations
- To cover funeral expenses
- To make up for the loss of the holder’s income upon death
- To pay off debt
- For peace of mind
Types of Life Insurance to Consider
When it comes to buying life insurance, there are two main options: Term life and permanent life, also called universal.
Term Life Insurance
This type of life insurance is in effect for a set amount of time, generally 10, 20 or 30 years. The policy will end if:
- The policy holder passes away
- The term is outlived, and payouts are no longer available
- Premiums go unpaid
With term life insurance, the beneficiary can receive the policy’s value in a tax-free lump sum or in installments paid by an interest-earning account. The interest earned might be taxed.
Keep in mind that if your term ends, you have the option of establishing another term insurance policy.
Permanent Life Insurance
Permanent life insurance (whole and universal plans) don’t have term limits. These more expensive policies include a savings and investment option that lets you access some of the funds while you’re still living. Over the years, your investment grows.
For more information about term versus permanent life insurance, see our article: Life Insurance Quote: What Is It?
Life Insurance for Married Couples
When you decide to buy life insurance for married couples, you have a couple of choices:
Get two individual policies
Buy two independent term life insurance policies, which are less expensive and straight-forward than permanent policies.
Buy a joint life insurance policy
Joint life insurance covers multiple individuals in a single policy. It is available as both term and permanent policies; permanent universal insurance policies, which include a cash value, are the most common.
Joint life policies are available with first-to-die and second-to-die benefits.
- First-to-die policies pay out when each person on the policy dies.
- Second-to-die coverage doesn’t pay out until BOTH individuals die. This is more expensive than first-to-die policies, so premiums are higher.
One caveat to keep in mind is that is you get divorced down the road you’ll have to rework your joint life insurance to fit your new situation.
When is the Best Time to Buy Life Insurance?
The right time to buy life insurance coverage? Anytime, really. But for your best options come down to a few points:
- If possible, buy when you’re young. Plenty of people purchase life insurance in middle age, but for the lowest premiums possible. The younger you are the better rates.
- Get coverage when you start to grow your family. Benefit payouts can be used to fund your children’s future education.
- You want to leave money for a non-profit. Say, you have no immediate family and/or simply decide you want some cash to go to your favorite cause. Just name the organization as the beneficiary.
How Much Should Each Spouse Have the Same Amount of Coverage?
When purchasing life insurance for a married couple, you have some choices to make about how much coverage each partner receives.
If you want, each spouse can have the same amount of term life coverage. Or, you can choose to buy more coverage for the spouse that has more earning power. The goal is to consider how much each spouse would need to safeguard financial stability.
To get an overall figure to start with, take a look at how much money you owe.
What does your debt look like? Do you have a mortgage that could be paid off using beneficiary funds? How much do you owe on cars? If your credit card debt is substantial, be ready to pay it down with life insurance benefits. What about the earnings lost at death? Generally, you should consider an insurance benefit that is five to ten times the policy holder’s income.
Now take a look at possible future expenses.
In the years ahead, what kind of expenses do you foresee? A new car? College tuition? Life insurance can help the remaining family survive.
Looking at the variables relevant to your situation, add up figures for what you want to include, and you’ll have a general feel for how much insurance coverage you should purchase.
Isn’t My Life Insurance Through Work Enough?
Many companies provide employees with individual and group life insurance. These are certainly nice to have, but by themselves not likely to provide a big enough benefit. Besides that, keep in mind that any life insurance through your job may expire as soon as you leave the company. Since any benefits gained through these kinds of accounts are typically inadequate to cover everything, go ahead and keep the coverage, but buy additional coverage privately for more peace of mind.
How to Buy Life Insurance for Married Couples?
The first step is shopping. Once you apply for a joint insurance policy or each get individual policies, you will probably be required to take a physical exam before premium amounts are finalized. The insurance company can typically send a medical professional to your home to administer a simple exam.
Shop for Life Insurance
Buying insurance has never been easier. Websites such as EINSURANCE simplify the process so it’s a matter getting online for a wide range of free life insurance quotes from leading carriers, brokers and agencies. Professionals are available to talk to about what kind of policy is best for meeting your needs.