What Every Married Couple Needs to Know About Life Insurance
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Preparing for marriage can be one of the most exciting times of a couple’s life. While preparing to join together as one, couples might also be discussing all of the things needed for their new lives together. Despite all of these conversations, the one topic of discussion that is usually left out is life insurance. Sometimes, it’s just plain oversight, but other times, couples just don’t think they need it or they might also feel that they have more than enough time to get it. In today’s world, every married couple needs to know about life insurance and its importance to their family’s well-being.
Another problem is that people in general automatically associate life insurance with death. And who wants to think about death especially at the beginning of a marriage? In reality, life insurance should be thought of as a gift to your spouse or other relatives so that they won’t have to struggle financially after you leave this earth.
So today, we are going to take some time to break down what every married couple needs to know about life insurance so that you and your spouse can truly understand why life insurance is important. Newlyweds, this information is also relevant to you too once you actually say “I do.”
What is life insurance
Without getting into all of the legal jargon, a life insurance policy is basically a contract between you and the insurance company. In exchange for your premium payments, the insurance company provides a lump-sum payment or death benefit upon the insured person’s death.
Life insurance benefits are typically paid within 30 to 60 days after filing the claim. However; if there are any issues i.e. the insured person dies within the first two years of the issuance of the policy, then there can be delays.
The lump-sum payment is generally not counted as taxable income and the beneficiary does not have to pay taxes on it. However; according to the IRS, the interest received is taxable and it should be reported.
Types of life insurance
There are two main types or categories of life insurance which are Term and Permanent. Term insurance policies provide coverage for a specified period of time anywhere from 1 to 40 years. This type of coverage provides the greatest value for the lowest cost or premium, making it a good choice for young families or people with limited income. There is no cash value for a term policy.
On the other hand, Permanent insurance offers lifelong protection and has a cash value component. Any cash accrued from this type of policy can be withdrawn to pay for personal expenses or used as a supplement form of income to your retirement. Although the cash value is tempting, some people usually steer clear of this type of insurance due to its high premiums.
Why married couples need life insurance
When you join in marriage, generally you are combining expenses, many of which you become solely responsible for even after your spouse’s death.
Ask yourself these questions…“If you or your spouse were to pass away, how would each of you maintain your standard of living? Would you be able to pay the bills, pay off debt, and take care of yourself financially?” Ponder through the process of what each of you would do in the other person’s absence.
The bottom line is that if you and your spouse depend on each other’s income to pay bills or manage debt, then both of you need life insurance. Having life insurance will serve as a source of income replacement to help one of you continue to take care of these responsibilities when the opposite spouse is gone. Why not prepare for the inevitable now before it’s too late?
If you need help with creating a solid plan for your income and expenses, then check out this free resource – 30 Day Money Challenge.
Benefits of purchasing life insurance
When thinking about what every married couple needs to know about life insurance, one of the first things that comes to mind is what will couples gain from it. If nothing mentioned thus far makes you even consider getting life insurance, then let’s take a look at some of the benefits:
- Shows that you are building a solid financial foundation in that you are thinking about your financial future
- Allows your family to maintain the same or similar standard of living when you leave (as long as you have enough coverage)
- Provides a sense of comfort to you in knowing that your family will not have to stress financially once you are gone
- Alleviates some of the pain and burden associated with your/spouse’s passing (families grieve differently when they know they won’t have to struggle financially)
- Gives remaining spouse the opportunity to build generational wealth (multiple uses for the money i.e. family can invest, pay off estate taxes, pay off debt, pay for final arrangements, use as an inheritance or just put it in a high-yield savings account)
While these are not the only benefits, these are a few of the main benefits that having life insurance provides to you and your loved ones.
When should couples get life insurance
Couples should purchase life insurance as soon as they possibly can because the earlier it’s bought, the more affordable it is. Buying a policy in your 20’s will be much cheaper than buying a policy in your 40’s. And the best part of buying the policy early on in a marriage is that the rates are locked in. So, if you purchase a 20-year term policy at an affordable rate, then you will continue to pay that same rate for 20 years.
What type of life insurance should couples get
It is typically recommended that young married couples get a term life insurance policy since term policies provide coverage for a specified period of time anywhere from 1 to 40 years. Although there is no cash value for term policies, this type of coverage provides the greatest value for the lowest cost or premium, making it a good choice for young families or people with limited income.
Where can couples get life insurance
If you do a simple Google search on “Term Life Insurance,” tons of results and companies will come up. So, it might be easier to start by getting a quote from one of your current insurance service providers to determine if it would be a good option to bundle all of your insurance with them.
However; if this is not an option, then there’s still some good news for you! Currently, Harmonic is running a very special promotion in which they are offering a complimentary $10,000 Accidental Death Insurance Policy. Yes, you read that right. There is no cost to you! They are trying to inform more people about their company and this promotion is a way to introduce people to them. Even if you already have life insurance, then that’s okay. You should still sign up for this policy because it will only serve as a source of extra coverage for you and your family.
What amount should couples get
While there is no one-size-fits-all plan, there are a few general guidelines to help you determine how much coverage you and your spouse should get. According to Dave Ramsey, each policy should be worth 10-12 times the annual income in coverage. For example, if you earn $50,000 per year and your spouse earns $90,000 per year, then you should get a policy worth at least $500,000. Your spouse should get a policy worth at least $900,000.
Of note, if you or your spouse is a stay-at-home-parent, then calculate the amount it will cost to replace all of the jobs the stay-at-home parent does for a full year. Some of these jobs might include childcare or homeschooling, cleaning, laundry services, and transportation to get kids back and forth to their activities. Then take that amount and multiply it by 10 or 12 to determine the minimum or maximum coverage needed.
Remember that the stay-at-home-parent will need financial support and the working spouse will need to figure out a plan to pay someone to do all of the work previously done by the stay-at-home-parent. So, having life insurance is beneficial to each spouse.
What about the kids
Protecting your kids is so important. Hence the reason why many people purchase separate life insurance for their children through companies such as Gerber Life. However; If you are not interested in purchasing a separate premium for your child, then simply add them as a rider on your own term life insurance policy or your spouse’s. It is relatively inexpensive and covers all of the kids in your household until they begin living on their own.
Final Thoughts
The goal of this article was to give you a general idea of what every married couple needs to know about life insurance. Hopefully, it really helped you to understand why it is important for married couples to purchase life insurance. Ultimately you and your spouse will need to make your own decision about whether or not you want to obtain life insurance. However; please remember that if you have anyone depending on you financially, then having this safety net would be a gift to your family when you are no longer here.
