You’ve tied the knot, and now you’re ready to embark on your new life as a married couple. Once you’ve returned from your honeymoon, you may think settling into happily ever after is the only thing left on your to-do list.
But in addition to sending out thank you cards and enjoying all those new home gadgets from your registry, you should also turn your attention to an important practical matter — life insurance.
Whether you and your spouse already have individual life insurance policies or not, the beginning of a marriage is an ideal time to evaluate your needs and make adjustments to provide for your loved ones in the event of your death.
Why Marriage Is an Ideal Time to Buy Life Insurance
In addition to being legally bound you and your spouse now share an insurable interest. Translation: You depend on each other and would suffer hardship if the other passes away. Life insurance can help your spouse pay the mortgage, fund their retirement, afford daily expenses and more in your absence.
If you have (or plan to have) children, life insurance becomes even more important to provide for their needs as well, including college expenses. And while it’s never too late to implement this important safeguard for your loved ones, life insurance becomes more expensive as you age, so buying it as early as possible is advantageous.
Should Married Couples Share Life Insurance Policies?
Both you and your spouse should have life insurance, but the question of joint policy or separate policies depends on your personal finances. Separate policies are more common and therefore more plentiful. Joint policies have some tax benefits for couples with higher incomes. However, they aren’t as popular as separate policies, so you may have a harder time finding one. And ultimately, the right policy type for you and your spouse will come down to your individual circumstances.
Joint Life Insurance Policies
While joint coverage is typically less expensive than two separate policies, if one spouse has health issues, it can actually cost more than individual policies. Typically, shared policies are more common among couples with higher net worth because it can lessen the tax burden on their beneficiaries. In general, joint policies offer one of two options — either a first-to-die policy, which pays out when the first spouse dies, or a second-to-die policy, which pays out when both parties pass away.
If your spouse will be a beneficiary, a first-to die policy is a good option because it ensures they will receive a payout upon your death. Because second-to-die policies do not pay out until both parties die, they are most commonly utilized to benefit extended family members, such as children, grandchildren or other relatives. They can be used to transfer assets to non-familial beneficiaries, such as friends, business partners or even a nonprofit organization or trust.
Separate Life Insurance Policies
Separate policies are more plentiful and popular for a few reasons. First, separate policies are more easily customized to each person’s contributions and needs. For example, if your income contributes more to household expenses, your policy can reflect that to ensure the same lifestyle your spouse is accustomed to should you pass away.
Separate policies also open up options for the kind of policy you can choose. Whether that’s a term or whole life insurance policy, you can pick whatever best meets your needs. And in the event of divorce, separate life insurance policies eliminate the problem of adjudicating a joint policy.
How Much Life Insurance Should a Married Couple Have?
Finding the right-sized policy for you and your spouse will depend on your goals for life insurance. Do you simply need to ensure the basics (housing, utilities and other fundamental living expenses) are covered should one of you die? Or do you want your policy to provide for extras like travel and hobbies?
To determine exactly how much life insurance you and your spouse need, a common guideline may be to purchase a policy worth 10 times your income. Bear in mind, this figure is a good starting place, but be sure to also factor in your overall debts and how much you have in savings, too. And if you and your spouse already have children or plan to, consider the DIME (debt, income, mortgage and education) method, which includes higher education expenses for dependents.
Begin Married Life with Confidence
The honeymoon phase is filled with exciting hopes and plans for your shared future together. You may be purchasing your first home together or starting a family. By purchasing life insurance at this critical juncture, filled with new beginnings, you can ensure your beloved’s financial security for all the years to come.
Ally is working with Ladder to bring you an innovative approach to term life insurance with an easy online application process and a variety of coverage options to fit a wide range of needs.
Life insurance and marriage go hand in hand. Help protect your family’s future, and apply for life insurance.
Disclosures: Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers – for further details see www.ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.