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You make plans with your partner all the time. Some are relatively simple, like Sushi or tacos? or Should we take the kids to Florida this year?
It’s harder to ask, What would happen if I lost you?
For lots of families, life insurance is a way to help protect your partner’s—and your kids’—financial future, even if you weren’t around. No policy can replace you or your partner, but a life insurance benefit can help one of you make ends meet if the other passes away unexpectedly. (Do you really need life insurance?)
That’s why many couples tend to shop for life insurance together. You’ll likely end up applying for separate life insurance policies rather than term life insurance for married couples specifically. But there’s a good chance you’ll be looking together at the same time, comparing notes and discussing which policies to go with.
As you bind your lives and futures together, your finances become increasingly entwined. Life insurance is an agreement between you and an insurer saying that if you were to pass away, they would pay the person or people you choose as your beneficiary.
That can include your spouse, who would receive a "death benefit" in the amount of the coverage you chose when you purchased the policy, as long as your policy is active and in force at the time you pass away.
Your spouse could use this money for any of a number of things, including but not limited to:
Your final expenses
Paying off debt, including a mortgage
Day-to-day living expenses
Supporting your children
Investing the money to provide an income stream for the future
Here’s how to navigate the process as a twosome.
Just like some spouses have a “spender” and “saver” when it comes to budgeting, you might find that one of you is eager to explore life insurance while the other is more hesitant.
“I tell clients all the time, life insurance is just like car insurance,” says Rose Price, a Certified Financial Planner and partner at VLP Financial Advisors. “It’s the insurance you hope you never need, but if you do, you’re very happy you have it.”
There are many different ways you can use a life insurance payout. For Jamie Beth Schindler, a writer in Pennsylvania, life insurance was an important cushion during a difficult time in her life. Her father kept a life insurance policy, even though his mortgage was paid off and Jamie and her brother were already adults.
“I knew about it only because I was managing his finances while he was sick,” she says. When he died, half of the death benefit went to his own aging father, and the other half was split between Jamie and her brother.
Because her father’s illness had been incredibly stressful for her as his power of attorney, healthcare proxy and daughter, she used some of her share to take a trip. “The rest of it has served as a cushion. My husband and I have both had periods of unemployment and under-employment, and knowing we could pull from savings has given us some flexibility in the decisions we are able to make,” she says.
If your partner’s hesitation is that life insurance is too expensive, you might find out that there are more affordable options than you expected. Here's how to have the life insurance conversation with your spouse.
If you hear someone talking about "spouse life insurance," they may be referring to a joint life insurance policy. Most of the time, instead of looking at couples life insurance, it will likely make sense to take out two separate policies.
So, what is a joint life insurance policy?
Joint life insurance policies cover both spouses, in either a first-to-die or second-to-die policy. A first-to-die policy pays a death benefit after the first partner dies. But then the policy ends, so the surviving partner would need to apply for a new policy to continue their coverage.
With a second-to-die policy, the beneficiary won’t receive a payout until both you and your partner pass away. This defeats the purpose for couples who would rely on a death benefit to help support the surviving spouse.
Separate, or individual, policies aren’t affected by what happens to your partner. Your policy covers you for the term you choose. That means that whichever of you were to pass away first, their beneficiaries would receive a death benefit (as long as the monthly payments are up to date) and the other partner would continue to be covered.
In most cases, if you're looking for term life insurance for married couples, you'll probably find that two individual policies better fit your needs.
Life insurance comes in various forms. Most couples who are looking for life insurance as coverage against worst-case scenarios (as opposed to buying a policy as part of a wealth management plan) compare the pros and cons of term and whole life insurance policies.
There's no one "best type of life insurance for couples," but term life insurance tends to be significantly cheaper than whole life. The downside is, if you outlive the term, your coverage expires and you don’t get any money. Whole life provides a death benefit payout no matter when you pass away, but your premiums could be almost 20 times higher than comparable coverage with a term life policy.
(A 30-year-old, non-smoking man in excellent health in Washington, DC might get a quote of $460+ per month for $500,000 coverage on a whole life policy, according to a quote we got from State Farm, and only $24 monthly for the same coverage as 20-year term life through Fabric.)
Although you and your partner don’t necessarily have to make the same decision when it comes to term vs. whole life, it’ll probably be helpful to chat out the pros and cons together to decide what would be the most helpful for your family. After all, the decision you make will most directly impact your spouse, and vice versa.
In cases where couples find themselves disagreeing about which route is better, some couples split the difference by taking out multiple policies to add up to the coverage amount they want.
For example, if you want $600,000 of coverage, you might choose to take out a $500,000 term life policy and a $100,000 whole life policy. If you die, the combined payout is $600,000. In the meantime, though, you have lower total premium payments than relying on whole life for all the coverage you want. You also have the peace of mind of knowing there’s at least some payout as long as you keep up with premiums on the whole life policy.
If you opt for life insurance policies that are independent from each other, does it matter if you use the same or different insurance companies?
“It tends to be easier if you can utilize the same company,” Price says, because you won’t have to keep track of documents and contact information for two companies.
If you both expect to get the preferred category of insurance rates, it’s probably more straightforward to choose a life insurance provider together.
“The only caveat is if you have a medical condition or are on medication,” Price says, “it may make sense to work with the underwriting team and ask if there’s one company or another that is better suited for you.”
In other words, the partner with a medical condition should choose a company that’s most likely to work most favorably with their health issues. If the other person can find a cheaper policy with another company, that might be the best bet.
Life insurance underwriters calculate the max coverage they can offer you based on your “human life value.” That’s usually based on your salary and how many years you have left to work. For non-employed partners and stay-at-home parents, human life value is usually based on a percentage (typically 50 to 100 percent) of what the employed partner makes.
(Not sure whether or not to quit your job after having a baby? We can help you assess which options feel right.)
Just because you’re approved for a million-dollar life insurance policy doesn’t mean you automatically need to go with that option. But Price cautions against playing it too small with your coverage amount, either. Life insurance policies typically get more expensive the older you are when you apply, so locking in a lower premium now might give you more coverage bang for your buck.
Price often hears from people who bought life insurance through work and picked an arbitrary coverage amount, like twice their annual salary. “Okay, what if you die at 40? How far does that get your family?” she asks.
Instead, think about how much life insurance you need in terms of what your partner would need to pay for if you were gone. If you make unequal salaries or if one of you stays at home with the kids, then you might opt for different coverage amounts.
For example, maybe you calculate how much would make up for what your working spouse would have contributed financially for a decade; maybe for a stay-at-home spouse you calculate the additional costs of childcare, housework and extra expenses as the surviving spouse takes on a greater burden outside of work.
In some cases, if one spouse works and the other doesn’t, it may make sense for the working spouse to apply first and for the stay-at-home parent to apply second. Generally speaking, life insurance is meant to replace money you would have earned, so from the insurer’s perspective, it makes sense to protect the family’s income first, and then the support partner next.
(Read more: What should I do with a life insurance benefit?)
When considering a coverage amount that’s appropriate, it’s important to factor in any existing life insurance coverage as well as your current income. That’s because an application can be denied for lack of financial justification if the coverage goes beyond what you’re eligible for.
Each person's situation is different, but many start thinking about life insurance around they time they tie the knot. That's for a few reasons. These include:
It's usually better to think about this sooner than later because life insurance gets more expensive the longer you wait.
You might be adding more expenses. Often, when people get married they take on some larger financial burdens, such as renting a larger place to live or investing in nice furniture to fill your new space. Life insurance can help the surviving spouse to maintain their lifestyle in your absence.
You and your new spouse are starting to think about the future, including starting a family. Life insurance is intended to help those who depend on you financially, by providing them support if you were no longer here.
As you unite your lives, you might also be joining finances. In many cases, that involves taking on each other's debt burdens. That could include signing a mortgage or car loan together. If one of you were to pass away, the other would still be responsible for co-signed debt. If that person would struggle to pay down the loan alone, then life insurance could be a fit.
If you want to apply for one policy to cover both of you as a couple, you might consider joint life insurance. That said, in many cases it's more beneficial to opt for two separate, individual policies. That's because joint life insurance can sometimes be restrictive.
Instead of simply paying a death benefit when either of you dies, joint life insurance policies tend to be either first-to-die or second-to-die policies. That means that the benefit is contingent on whether the other person is still alive or not, rather than being standalone.
Yes. Although joint life insurance does exist to cover both couples in one agreement, it's often easier and more flexible to cover each spouse separately with individual life policies.
That will depend on your own situation and individual needs. If you would be well served by a joint life insurance policy that expired after the first spouse passed away (known as a first-to-die policy), then that could be a fit for you. An example of this situation might be if each spouse would need support in the other's absence, but no one would struggle financially in the second spouse's absence.
On the other hand, if you are primarily seeking life insurance to help protect a family with children or other dependents, you might prefer a policy that insures both adults separately.
One rule of thumb is to seek out a coverage amount that's five to 10 times your annual income. So, that would apply to both spouses (and is why each spouse might choose a different coverage amount rather than identical policies).
In addition to using the benefit to pay off debt and cover living expenses, the surviving spouse could choose invest some of the money, creating a revenue stream that could continue into the future.
Here's how to think about how much life insurance you need.
If you and your spouse are getting individual policies, your marital status doesn't matter. Life insurance underwriting is the process through which an insurer decides whether it can offer you coverage and at what price.
This is determined by things like your health and financial history, and your lifestyle habits (do you smoke? do you enjoy skydiving?). But marital status doesn't factor in.
The beneficiary of your policy is the person who is set to receive the death benefit if something were to happen to you. You can usually choose multiple beneficiaries and contingent beneficiaries, who are essentially back-ups if something happens to the main people you've chosen.
If you're shopping for life insurance alongside your spouse, there's a good chance you'll want to choose each other as your beneficiary. That way, if something happened to either of you, the other one would receive some financial breathing room to help pay bills, cover final expenses and more.
Even if you have children together, it's usually not ideal to name your young kids as your beneficiaries because it's often problematic for insurers to pay out a death benefit to someone who isn't yet a legal adult. (Here’s what you should know about life insurance for parents.)
Being married doesn't mean you necessarily have to choose your spouse as your beneficiary. But if you live in a community property state (which include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), you need your spouse's consent if you want to list someone on your policy other than them. Alaska has "opt-in" community property laws.
Here's more on how to choose a life insurance beneficiary.
If you share bills, a mortgage or dependents with your partners despite not being officially married, you probably have similar financial needs as though you were married. In order to take out a life insurance policy on someone, you need to demonstrate "insurable interest."
That means demonstrating that you'd be harmed financially if the person were no longer alive. In a nutshell, this is the reason you can't just take out a life insurance policy on Beyonce (or some random acquaintance you know).
But in the case of a domestic partner or someone whose finances are entwined with your own, you presumably have legitimate insurable interest. The insurer may inquire about this and want to more deeply understand your relationship to this person. But if you can show, for example, that you own a home together and have shared dependents, this shouldn't be a problem.
In short, no. Despite what the movies might have you think, it's illegal to take out a policy on someone without them knowing. The person whose life is being insured needs to sign their consent to the policy. Signing on behalf of your partner or forging their signature is insurance fraud and could be grounds for the insurance company to contest the claim down the line.
The purpose life insurance is typically to help protect the people who depend on you financially. If you have kids, the big question is: Could your spouse support the whole family by themselves? And if you don't have kids or other dependents, you might ask: Could each of us maintain our current lifestyle without the other?
If the answer to any of those questions is no, then both spouses most likely need a life insurance policy.
Often life insurance is framed as a way of replacing the income or financial contribution someone would've made if they were still alive. But another way of looking at this is that life insurance covers the monetary value you contribute, which doesn’t always come in the form of a paycheck.
Stay-at-home parents can function as teachers, housekeepers, chefs, laundry-doers and much, much more. In addition to the cost of replacing those functions, it's worth considering how the stay-at-home spouse contributes to the working spouse's job growth.
If someone's at home taking care of dinner or available to pick up the kids, that can enable the working spouse to rise through the ranks at the office. So if the stay-at-home spouse were no longer present, what kind of financial contribution could account for the cost of hiring enough help to compensate, or to make up for the reduced job growth?
Here's more on life insurance for stay-at-home parents.
That's a personal decision that might vary from family to family. For many people, however, life insurance doesn't make sense for their children. That's because life insurance typically covers someone who contributes to the family financially, and kids cost money rather than bringing in income.
Plus, children are statistically very unlikely to pass away. As much as a life insurance policy could help defray the costs of a funeral for a child, saving that money instead could have a similar impact. Here's the real deal on life insurance for children.
There are a few things to bear in mind for anyone looking at term life insurance. That includes:
Term length: How long should your coverage last? Many people choose term lengths that would cover the period of their greatest financial need, such as while their children are still young.
Coverage amount: How much coverage do each of you need?
Health exams: Many policies require applicants to undergo a life insurance health exam, though some companies such as Fabric now offer no-exam term life insurance. If you qualify, you may be able to skip the health exam entirely if you apply through Fabric.
If you and your spouse are planning to purchase two separate policies, then the question really comes down to how much each of your policies costs.
Below are some sample life insurance quotes through Fabric. These are only theoretical examples, and your actual rates will depend on your personal details.
These rates are for a 30-year-old, non-smoking female in excellent health (in other words, the best risk class) in Florida:
|10-year term||15-year term||20-year term|
Below are the rates for a 30-year-old, non-smoking male in excellent health in Texas (we chose a different state just to a provide variety of examples):
|10-year term||15-year term||20-year term|
Wedding vows talk about commitment to your partner “until death do us part.” The life insurance conversation can be a way to put that promise into action, setting up a plan to take care of each other’s financial well-being, whatever the future sends your way.
Fabric exists to help young families master their money. Our articles abide by strict editorial standards.
Fabric by Gerber Life exists to help young families master their money. Our articles abide by strict editorial standards.
Information provided is general and educational in nature and is not intended to be, and should not be construed as, financial, legal, or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. We make no warranties with regard to the information or results obtained by its use, and disclaim any liability arising out of your use of, or reliance on, the information.
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