Okay, so you’ve figured out you need term life insurance (congrats, you’ve come to the right place.) But, what about your better half? If one spouse is covered, does the other need to be also?
Often, the answer is yes.
With marriage or a lifelong partnership comes a myriad of shared financial responsibilities and expenses times two – the mortgage or rent, utilities, car payments, and, eventually, the costs that go hand-in-hand having children. Not to mention, most people would want to leave their partner in as good if not a better financial situation, if they could. This is where life insurance comes in.
When both spouses have life insurance, it offers peace of mind that if one person were no longer around, the other wouldn’t be left in a tight financial spot. Life insurance serves as a legacy (and safety net) that you can provide for your life partner.
In fact, a recent study from LIMRA found that 39% of respondents wish their spouse had more life insurance.*
So, what kind of couples need individual life insurance policies (or more coverage)? Here are the most common scenarios:
You both have life insurance through work
One of the biggest misconceptions about life insurance is that if you have coverage through work, you’re set. The reality is that life insurance through work is, yes, a great work perk, but it’s usually not enough coverage when you have a mortgage, or children, or any other shared financial obligations with someone.
Most employer-provided policies are in amounts of one or two times your annual salary. A standard rule of thumb for coverage is to have a policy that is equal to at least five to ten times your yearly income. Additionally, a life insurance policy through work usually isn’t portable, which means when you leave your job, coverage ends. With life insurance coverage, you want it to go where you go.
For most young, healthy individuals, it’s more cost-effective (and protective) to have an individual policy either in place of or addition to your work one. To get an idea of what term life insurance cost: a 20-year, $500,000 Haven Term policy would run a healthy 30-year-old woman about $18 per month. Quite the bargain for a whole lot of peace of mind.
You’re a working couple with children or are planning to have kids soon
If you and your spouse work and have or are planning to have children, then it’s likely that both of you should buy and maintain individual term life insurance policies.
The reasoning is, should something happen to one of you, the surviving spouse will need to play both parenting roles, as well as manage a career and earn enough income to continue supporting your family. Covering household expenses, including a mortgage or rent, along with paying for childcare can be a severe burden on a single parent. Having a term life insurance policy provides a financial cushion that can be invaluable during an already difficult time.
You have children and one spouse stays at home
Even if one spouse remains at home while the other earns the primary income, it is essential to maintain two policies.
A stay-at-home parent is hardly a “non-working” parent (just ask any mom or dad rushing from carpool to the grocery store, to soccer practice), and the services he or she provide would be costly to replace.
Think of it this way: a team of two people works to keep your household running. If that team gets cut in half, you’re facing both a personal and an economic loss. Just how much of a loss may surprise you — Salary.com estimates that a stay-at-home spouse with one preschool age child and one child in school provides value equal to a salary of $112,963.
Unless the working parent is somehow able to handle all of the household responsibilities and care of the children alone, he or she may need to pay for childcare or hire a nanny to help with the day-to-day tasks. Regardless of who is the primary income earner, both parents should have life insurance coverage until the children are adults.
You’re a couple without children
If you and your spouse don’t have children, it’s not always necessary for you to hold individual term life insurance policies. However, there are factors for you to consider before you completely write off the decision as a “no.” For example, mortgages, student loans, substantial debt, very little savings or any combination of the four, can leave one spouse in a vulnerable financial situation if anything should happen to the other.
If you’re concerned that neither you nor your spouse would be able to take over the regular payment of your accumulative expenses, purchasing your own term life insurance policies can provide you both with a financial cushion. With term lengths of 10, 15, 20 or even 30 years, you can select a policy length that fits the needs of you and your spouse and ensures you have the coverage length you need. And, if purchased while you’re both young and in good health, it can be an inexpensive part of your monthly budget. For example, a healthy 35-year-old man can purchase a 30-year, $500,000 policy starting at about $40 per month. Probably far less than your monthly TV bill. Assuming you haven’t cut the cord or anything.
Term life insurance as your legacy
Term life insurance isn’t a one-size-fits-all solution for couples. Your financial situation, your lifestyle — they all play a significant role in determining if one or both of you need coverage. However, life insurance is a very valuable solution for helping to ensure you leave a financial legacy to leave your loved ones — no matter the current status of your savings accounts.
The most valuable thing you and your partner can do is to sit down and have a conversation about your wishes for the other person if you were no longer around. And, what would the financial impact be?
It’s not the easiest of discussions, but it’s a vital one. Each person in a marriage should feel secure and financially protected no matter what life throws at you. Use the information at your disposal to determine as a unit who needs life insurance and how much coverage is required. After all, peace of mind is key to any happy marriage.
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* Source: LIMRA 2017 Insurance Barometer Study