Do Both My Spouse and I Need Life Insurance?

Do both my spouse and I need life insurance?

Of all the decisions to make as a married couple, whether to buy term life insurance usually doesn’t fall high on the list for most people.

The process has a reputation for being long and confusing (it’s not anymore), and you’re committing to something that you’ll potentially pay for over the course of the next 10, 20 or even 30 years. While this decision shouldn’t be made lightly, the value of preparedness, the peace of mind it provides a family, and the typically low monthly cost for a policy should make it an easier choice than maybe you both think.

Most of the time, both spouses need coverage in order to help ensure financial protection for the unexpected. This becomes even more important once your family grows to include children.

Here’s how you and your spouse can determine if you both need life insurance:

You’re a Working Couple With Children Or Are Planning to Have Them

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 separate 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. If something were to happen to one of you, the life insurance covers household expenses, including a mortgage or rent, along with paying for childcare can be a serious burden on a single parent. Having a term life insurance policy provides a financial cushion that can be invaluable during an already difficult time.

Fortunately, term life policies are currently very affordable. If you’re in your 20s or 30s and in good health, a policy with a $500,000 benefit will usually cost about $20 per month – which is probably a lot less than your cable bill.

You Have Children & One Spouse Stays At Home

Even if one spouse stays at home while the other earns the primary income, it still may be important to maintain two policies.

A stay-at-home parent is hardly a “non-working” parent (just ask any harried mom or dad rushing from carpool, to the grocery store, to soccer practice), and the services he or she provided 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 — estimates that a stay-at-home mother with one pre-school 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 work and care of the children, he or she may need to pay for childcare or hire a nanny to help with the day-to-day tasks. Until your children are 18, if one person is staying at home to care for them, both parents should consider purchasing a term life insurance policy.

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.

If you’re concerned that neither you nor your spouse would be able to take over the regular payment of your accumulative expenses, purchasing a term life insurance policy can provide you both with the necessary financial cushion. With term lengths of 10, 20 or even 30 years, you can select a policy length that fits the needs of you and your spouse and ensures you have exactly 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.

When You Don’t Need Life Insurance For Both Spouses

Term life insurance isn’t one-size-fits-all for married couples – there are situations where it may not be necessary to maintain individual policies. For example, if you already have a substantial financial cushion, either from personal savings, a trust, an inheritance, or another source, then you won’t be susceptible to financial insecurity if you lose your loved one.

How much accrued wealth should you have before choosing to opt out of life insurance? The answer depends on your lifestyle, and cost of living. However, if you have enough available to cover your bills for at least 5 years, then separate term life insurance policies probably aren’t necessary.

The Takeaway

When determining the value of a term life insurance policy for both you and your spouse, it’s important to consider the dollar amount combination of what you’d lose in income and what added expenses you may accrue should one spouse die. Above all, each person in a marriage should feel secure, and financially safe in the event of a tragic loss. It’s up to you as individuals to determine how this goal is best accomplished — but more often than not, having individual insurance policies for both of you is a good start.

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