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What is Spouse Life Insurance?
Spouse life insurance is a straightforward and affordable method to ensure that if either spouse or partner were to die unexpectedly, the surviving spouse or beneficiaries would be less likely to be left with financially devastating financial burdens.
Whether a spouse or partner contributes income is immaterial because, for most family units, both spouses contribute by either income or services or both.
For example, if your spouse is a homemaker who doesn’t share in income responsibilities, he or she certainly provides valuable household services that can be costly to replace.
Consider the additional expenses you would incur for housekeeping, laundry, meals, and transportation for the children if your spouse were no longer in the picture.
This is where spouse life insurance provides the funds that would allow you to hire service providers to take responsibility for the services that your spouse or partner took care of every day.
Reasons to Buy Life Insurance on Your Spouse
When you consider the income and or services that your spouse brings to the relationship, it can be overwhelming when you consider the financing you would need to replace lost income or pay for lost services because of an unexpected death of a spouse.
- Income Replacement – Most breadwinners in a family provide some or all of the funds needed for living expenses year after year. These living expenses primarily consist of household expenses such as a mortgage or rent payment, ordinary living expenses, debt service, saving for college tuition, and funding a retirement plan.
- Household Services Replacement – Most couples with children share household services, or one of the spouses is the primary service provider. This means that when one spouse is no longer in the picture, the surviving spouse would either have to take care of all the household services or hire a third party to handle household services like daycare, transportation, meals, laundry services, and all of the many things that are done to keep the household running smoothly.
- Debt, College Planning, and Retirement – Whenever a couple shares income, they generally share expenses as well. Most couples will both guarantee mortgage repayment and co-sign on auto loans and credit cards. When one spouse dies, the other is responsible for the family’s debt and future expenditures like college expenses and saving for retirement. This holds true whether each spouse earns an income or not. When we consider income replacement, the cost of household services, and saving for college and retirement, spouse life insurance should always be a primary consideration from day one.
Do both spouses need Life Insurance?
Unless you are a high net-worth individual, the answer here is an emphatic yes. However, even in the event that a couple is considered high net worth, the cost of purchasing life insurance for each spouse makes better economic sense than using valuable liquid assets that are likely earning interest that has been earmarked for a couple’s retirement.
If you consider the interest lost when an asset is made unavailable versus the premium for a term life insurance policy, the trade-off simply doesn’t make good financial sense.
Moreover, in most cases, there are children that must be taken into consideration. Parents today, as in the past, generally want their children to have better opportunities than they had, and in almost every case, those opportunities start with a college education that can be expensive even when scholarship money is available.
But What if I'm a Stay-At-Home Parent?
Any stay-at-home mom or dad wondering, “Do I need life insurance?” should assess their current situation and imagine how their absence would affect their family. If you were to die, not only would that put an emotional strain on your partner, but it would put him or her in a financial bind. Daycare isn’t cheap, neither are long-term babysitters. The loss of the non-breadwinner in the family would cause increased child-care expenses for the breadwinner, which—even for the most highly-compensated breadwinner—can be a strain. This is an argument for non-breadwinners to purchase life insurance.
Another reason why it is beneficial for non-breadwinners to also be insured, is to offer a “cushion” of sorts for the surviving spouse. It is likely that the emotional stress of the death of a loved one could lead them to have to cut back on working hours or take additional time off. Having a payout from a life insurance policy can help ease this burden.
Ways to Buy Life Insurance for a Spouse
There are generally five different methods for obtaining affordable spouse life insurance:
Group life insurance through your employer – In most cases, a spouse who is employed full-time can get employer-sponsored life insurance that is either free to the employee or provided at a heavily discounted rate.
Typically, one of the primary benefits of obtaining life insurance through your employer is that there is minimal underwriting involved. Most policies are considered guaranteed-issue, which means your health is not considered by the insurance company.
Additionally, most employers will limit the amount of coverage they are willing to pay for to a multiple of your annual earnings (1 or 2 times) depending on your seniority and position with the company.
A spouse Rider – Typically, group life insurance policies will allow the employee to add a spouse to their policy at a heavily discounted rate. This is referred to as a spouse rider, and most companies will offer it.
There are, however, limitations on the amount of coverage you can purchase on your spouse, and in most cases, the additional insured must be married to the primary insured.
The open Marketplace – Often, buying insurance in the open marketplace makes better sense than purchasing through an employer because most group life insurance policies are not portable (can’t take it with you).
If you prefer to purchase more life insurance than your employer will allow and find comfort in knowing that your policy will follow you if you leave the company, then buying a policy from a private insurance company in the open marketplace will make better financial sense for you and your spouse.
Separate individual life insurance policies – We have worked with thousands of couples over the years who prefer to have separate life insurance policies for various reasons. Some couples prefer to mix cash value policies with term policies to reduce their total cost of life insurance and, at the same time, build cash value that earns interest.
Other couples prefer to have separate policies because they are unwilling to accept the limitations that usually come with purchasing life insurance via the spousal rider.
Joint life insurance policies – Joint life insurance, although a single policy that covers two people is a popular insurance solution for couples, but not always the cheapest way to purchase coverage.
Joint life coverage is generally written as permanent life insurance, which means it will build cash value over time and earn interest that is tax-deferred.
Most policies come with optional riders that can be added for an additional premium, which allows the applicant to broaden their coverage and living benefits.
Joint policies are available in two separate forms: first to die and second to die. First to die is like single-person coverage, so when one of the insureds dies, the company will pay the death benefit to the surviving spouse or other beneficiary listed on the policy. At the time of this writing, first-to-die policies are hard to find.
The second-to-die policy differs in that the insurance company will not pay the death benefit until both insured persons have passed away. Second-to-die policies are set up to benefit the surviving beneficiaries rather than a spouse who is insured on the policy.
Separate vs. Joint Life Insurance Policies
Although purchasing separate life insurance for each spouse or partner is generally the most common way of obtaining financial protection for the family, there are some occasions when a joint life insurance policy would be a better solution.
Joint life insurance policies generally offer permanent coverage, and in some cases, may be cheaper than separate permanent policies.
Joint coverage, however, is typically only offered to married couples or domestic partner relationships.
Moreover, when considering which type of policy will best suit your circumstances, your decision comes down to whether a first-to-die or second-to-die policy makes better sense.
If you want your spouse or domestic partner to receive the death benefit when you die, the first-to-die product will be the better choice. If, however, you want the death benefit to go to beneficiaries other than your spouse or domestic partner, a second-to-die policy will be the better choice.
During your insurance shopping process, be sure and discuss your needs and situation with your agent to get the best advice on which policy would be the best solution.
Which type of Life Insurance Policy is Best for You and Your Spouse?
In terms of affordability, term life insurance will likely be the better choice since permanent insurance generally has a much higher monthly premium.
Simply put, there is no type of life insurance that will cost less than term insurance except for an accidental death policy which provides limited coverage.
Whole life insurance is considered permanent coverage because the policy cannot be canceled by the insurance company as long as the premium is paid. Whole life policies also use a portion of the periodic premium to build a cash value account that earns interest that is tax-deferred.
The money in the cash value account can be accessed through policy loans, cash withdrawals, or by surrendering the policy for cash.
Your need for life insurance will determine the best policy for you and your spouse. For example, suppose your insurance need is to cover debts, college expenses, or a mortgage (temporary needs). In that case, Term Life Insurance is likely the better solution since it can ordinarily be converted to permanent insurance before the policy expires.
But, if your need is to obtain lifetime insurance coverage that is guaranteed to be there decades in the future, Whole Life Insurance would be the better choice.
Key Steps in Buying Spouse Life Insurance
The steps you’ll need to take when buying spouse life insurance is no different than buying life insurance for yourself. There are four basic items that need to be considered:
Anytime you are considering a life insurance purchase, the first question you’ll need to answer is how much coverage is sufficient for your circumstances and budget.
This step is very important because without taking time to consider your coverage needs, you and your spouse may come up short mitigating your financial risk when you need coverage the most.
As we mentioned earlier in this article, the type of insurance you purchase is as important as the amount of coverage you purchase. Remember, term insurance is temporary and accumulates no cash value. When it’s gone, it’s gone.
On the other hand, whole-life insurance (although more expensive) lasts a lifetime and builds cash value that you can access if needed. It’s an asset.
In today’s insurance marketplace, many insurance carriers are offering life insurance with no medical exam underwriting. This doesn’t mean they’re accepting an unknown risk because technology has made it possible to learn a lot about your current and historical health by accessing a national database known as the MIB.
If you prefer to purchase life insurance without a medical exam requirement, you’ll have many opportunities to do so.
You have many options when it comes to choosing your beneficiary. It can be your spouse, your children, or an entity like a charitable organization.
Your beneficiary should be designated based on your insurance needs and updated when appropriate. You can choose as many beneficiaries as you like, and you can select contingent beneficiaries if your primary beneficiaries are not alive when you die.
Life Insurance for Stay-at-Home Spouses
Non-working parents might not generate an income, but they do provide labor that would have to be replaced if they weren’t around. This includes taking care of their dependent children and doing housework – tasks that would normally need to be done otherwise.
So, while it may not seem like a stay-at-home spouse would not need life insurance, they certainly do.
The best life insurance for married couples is unique to each couple’s needs. An experienced insurance professional can help determine what is best for your individual and your spouse’s individual needs.
Insurers we recommend:
| COMPANY | STAY-AT-HOME SPOUSE POLICY |
|---|---|
| AIG | AIG will allow a stay-at-home spouse to purchase up to $1,500,000 of the working spouse’s coverage but with a limit of ten times the working spouse’s income if the household income is $25,000 or less. |
| Lincoln Financial | Lincoln Financial will allow a stay-at-home spouse to purchase coverage up to the amount of the working spouse’s policy. |
| Mutual of Omaha | Mutual of Omaha will allow a stay-at-home spouse to purchase coverage up to the amount of the working spouse’s coverage but subject to a $2,000,000 maximum. |
| Pacific Life | Pacific will allow a stay-at-home spouse to purchase up to 100% of the working spouse’s policy up to $3 million for applicants age 70 or lower. |
| Principal | Principal allows a stay-at-home spouse to purchase up to $1,000,000 of the working spouse’s coverage or up to $2,000,000 with extended terms and conditions |
| Prudential Life Insurance | Prudential will all a stay-at-home spouse to purchase up to 100% of the working spouse’s coverage with the maximum coverage considered on a case-by-case basis. |
| SBLI | SBLI will allow a stay-at-home spouse to purchase up to $2,000,000 in coverage. Larger amounts will be considered on a case-by-case basis. |
Click Here to view a list of the highly-rated insurance companies we represent.
Get a Spouse Life Insurance Policy
It will never be cheaper than today to get a spouse life insurance policy, and it has never been easier.
We invite you to click on the quote button on the right of this page to get an instant quote after offering minimal information, or you can call us at (866) 868-0099 and speak with an insurance professional who will help you find the life insurance best suited for your needs and budget. Also, you can contact LifeInsure.com through our website 24/7.
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