June 23, 2024
Life insurance for married couples

 

Navigating life as a married couple involves many shared decisions, from buying a home to planning for the future. Among these important decisions could be choosing the right life insurance. Having the right coverage helps ensure financial security and peace of mind for both partners, protecting against the unexpected. In this article, we’ll explore the different life insurance options available to married couples, from joint policies to individual coverage, and how to determine the best fit for your unique situation.

 

At Bankrate, we pride ourselves on being a trusted authority in personal finance, offering expert advice and comprehensive guides to help you make informed decisions. With our detailed insights and practical tips, we hope to equip you with the knowledge to choose the best life insurance policy for your needs.

 

Why married couples need life insurance

When searching for life insurance, you may want to consider how your family’s finances are set up and managed. Is one spouse the primary earner? Would either spouse have enough money to support the family if the other were to pass away? Often, buying life insurance for both spouses makes the most financial sense. Additionally, there are several other reasons why married couples would need life insurance.

 

You’re raising children together

One of the most compelling reasons for married couples’ life insurance is the need to protect their children’s future. If a primary provider passes away unexpectedly, the financial impact on the family can be severe. Life insurance can provide a safety net, ensuring that the loss of income doesn’t disrupt your children’s education, daily living expenses or future opportunities. This coverage helps maintain financial stability during a challenging time, allowing your family to focus on healing rather than financial worries.

 

Your expenses are increasing

If you and your spouse are adding expenses such as a new mortgage or higher rent, a new car payment or increased utility payments, both spouses must be prepared to take on the entirety of the expenses should one pass away. Obtaining life insurance for couples in a marriage can help spare your spouse from financial hardships in the future.

 

You have debts

If you and your spouse have shared debts, like a mortgage, car payments or college debt for your children, you probably don’t want your partner to be completely responsible for repayments if you pass away. Life insurance can help ensure your spouse isn’t overwhelmed by debt payments if anything happens to you.

 

Life insurance can be cheaper if you buy early

The cost of life insurance generally goes up as you get older and can be affected by many age-related health concerns. Buying life insurance at a younger age could help you secure a lower premium.

 

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Joint vs. separate life insurance

Married couples may have the option of obtaining separate life insurance policies or a joint life insurance policy. A single-life insurance policy will cover only one individual, while a joint life insurance policy will cover both spouses. Both options have pros and cons.

 

Joint life insurance policies

A joint life insurance policy, also known as a dual life insurance policy, covers two people. These policies are generally used by married couples who want to cover both spouses under one policy. Married couples who want to lower life insurance costs and protect their assets from taxes after death may consider getting a joint insurance policy.

 

Joint life insurance comes in two options: first-to-die and second-to-die. In a first-to-die policy, the surviving spouse will receive the death benefit payout after the first spouse dies. In the second-to-die, also known as survivorship policy, the beneficiaries will receive the death benefit after both spouses have passed away.

 

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Pros

May lower overall life insurance costs

Simplifies management with one policy

Can be useful for estate planning and minimizing taxes

Provides financial security to the surviving spouse or beneficiary

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Cons

Payout structure might not fit all needs (ex. second-to-die only pays out after both spouses pass away)

If the marriage ends, the policy may become complicated to manage

Limited flexibility compared to individual policies

Coverage may be less than individual policies for the same premium

Second spouse no longer covered in a first-to-die scenario

If one partner has health issues, the cost for the healthier spouse may be higher than individual coverage

Separate life insurance policies

A single life insurance policy will cover only one individual and will pay out a death benefit if the individual passes away while the policy is inforce. There are two main types of individual life insurance policies: term and permanent. Term policies cover you for a set period of time, usually 10 to 30 years. Permanent policies are designed to last your entire life, but some may mature at a certain age, typically between 90-121. A separate life insurance policy is not tied to your marital status.

 

Buying separate life insurance policies allows each spouse to choose from a variety of different options, including term life, whole life and universal life insurance. Since the policies aren’t tied together, you’ll be able to personalize each to the needs of each spouse.

 

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Pros

Greater flexibility in choosing different types of policies

Can be tailored to individual needs and financial goals

Each spouse has their own coverage, unaffected by changes in marital status

Allows for higher coverage amounts per individual

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Cons

Typically more expensive than a joint policy

Requires managing multiple policies

No potential cost savings from a combined policy

Individual underwriting might be more stringent and vary per spouse

Which type of life insurance policy is best?

Determining the best life insurance policy for you and your spouse depends on your unique circumstances and coverage needs. Here’s a look at the benefits and drawbacks of joint vs. separate policies, as well as term vs. permanent policies.

 

Joint Life Insurance Policies

Benefits: Simplifies management with one policy and may lower overall costs. It can also help with estate planning by providing financial security to the surviving spouse and minimizing taxes.

Drawbacks: Offers less flexibility and can be complicated to manage if the marriage ends. Coverage may be lower compared to individual policies for the same premium.

Separate Life Insurance Policies

Benefits: Provides greater customization and flexibility, allowing each spouse to choose different policy types and coverage amounts that suit their individual needs.

Drawbacks: Requires managing multiple policies. If risk factors, such as poor health, are present, premiums may be expensive.

Term Life Insurance

Benefits: Generally more affordable with lower premiums. Ideal for temporary needs, like covering a mortgage or supporting children until they are financially independent. Policies often include an option to convert into a permanent policy.

Drawbacks: Does not build cash value and only provides coverage for a set period. Renewal can become costly as you age.

Permanent Life Insurance

Benefits: Offers lifetime coverage with a cash value component that grows over time. Provides long-term financial security and benefits for estate planning.

Drawbacks: More expensive than term life insurance. Some policies may mature at a certain age, typically between 90 and 121.

Ultimately, the best policy for you will depend on your financial situation, coverage needs and personal preferences. If you value flexibility and individualized coverage, separate policies might be preferable. For simplicity and potential cost savings, a joint policy could be more suitable. Consulting with a licensed insurance agent can help you navigate these options and choose the best coverage for your circumstances.

 

Can we get life insurance if we’re in a domestic partnership?

Life insurance companies have become more accommodating to modern relationships, and many domestic partners often have the same financial security needs as married couples — whether opposite- or same-sex couples. While joint life insurance policies might not be available for all domestic partners, there are still plenty of options to ensure both partners are protected.

 

If you and your domestic partner are not legally married, you may need to provide additional documentation during the underwriting process to prove insurable interest. This could include documents like a lease with both names, jointly owned property, shared debts or proof of children together. Insurable interest shows the life insurance company that you rely on each other financially, which is essential for obtaining coverage.

 

One straightforward option is for each partner to purchase an individual life insurance policy and name the other as the beneficiary. This approach provides flexibility and control over your policy, allowing you to adjust beneficiaries, coverage amounts and other details as needed. It also ensures that your partner will receive the death benefit directly, usually tax-free and without going through probate. If you’re in a long-term relationship and share financial obligations, getting life insurance for each other can be a helpful step in protecting your financial future.

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