Dependent life insurance provides coverage in the event a spouse or dependent child dies. Typically purchased to meet after-death expenses, the amount of coverage is typically modest. Dependent life insurance policies may cover:
- A spouse who is not legally separated from the policy holder
- Unmarried children, stepchildren and adopted children older than 14 days old and younger than a specified age, often around age 21.
Dependent life insurance has restrictions, depending on the state you live in and the policy you have. To avoid some nefarious purposes, some states don’t allow dependent life insurance coverage at all. A policy owner cannot usually buy coverage for individual dependents, although you may be able to buy coverage just for a spouse or just for children. A dependent life insurance policy generally insures all dependents.
Some states limit the amount of dependent life insurance you can buy. When an employer provides coverage of $2,000 or more for each dependent, the amount is considered taxable for the employee. If employee contributions are used to purchase more than $2,000 for each dependent, there are no tax consequences.
Why Buy Dependent Life Insurance?
While life insurance is usually bought to replace the holder’s salary upon death to make sure dependents are taken care of, dependent life insurance is typically purchased to cover funeral and other expenses incurred because of the death of a spouse or children. A child’s death benefit can also be used to pay any uninsured medical bills for previous care of the child.
Before you can purchase dependent life insurance, you must have life insurance coverage yourself, whether its term, whole, variable or universal. Before buying, learn about the different kinds of life insurance and compare policies.