Bigger home, safer vehicle, new living room furniture…it’s sort of a rite of passage for married couples to buy some of the “bigger” things together — you know, as a couple. Thus, it only makes sense for a married couple to buy life insurance together. When both spouses have a life insurance policy, it ensures the surviving spouse can replace lost income, manage debt, take care of children, and more when another spouse passes away.
- Why Newly Married Couples Need Life Insurance
- Combined Finances
- Spouse’s Debt
- Starting a Family
- Stay-At-Home Parents
- Life Insurance Options for Newly Married Couples
- Term Life Insurance vs. Permanent Life Insurance
- Joint Life Insurance Policies
- How Much Life Insurance Do Newly Married Couples Need?
Why Newly Married Couples Need Life Insurance
There are several reasons for married couples to buy life insurance.
1. Combined Finances
Many couples combine their finances when they get married. This includes combining their incomes so they can afford bigger financial obligations such as buying a bigger home or renting a nicer apartment and purchasing newer vehicles.
By doing this, they’ve also combined their expenses. Often, these are expenses that one spouse wouldn’t be able to handle on their own. Having a life insurance policy provides income replacement that helps the surviving spouse cover these expenses.
2. Spouse’s Debt
Having a life insurance policy for married couples also helps a surviving spouse take on debt left behind after the other passes away.
Any debts you leave behind when you pass away get paid out of your assets, or estate, and this takes away from what you pass on to your spouse. Additionally, your spouse is responsible for debts accrued in joint accounts and, if you live in a community property state, your spouse is responsible for debts you took on after you got married (even personal debts such as the balance of a personal credit card).
3. Starting a Family
Having children is one of the biggest reasons for married couples to buy a life insurance policy. Children rely on their parents to take care of them, and it takes money to feed, clothe, and educate a child. Having a life insurance policy ensures the surviving parent is able to cover household expenses as well as continue providing for the children even in the face of a lost income.
Additionally, a life insurance policy is there to help when both parents die. Refer to Life Insurance for New Parents for information on how to name a beneficiary (the person who receives the death benefit) if both parents die.
4. Stay-At-Home Parents
As explained in Life Insurance for New Parents, many couples make the mistake of not covering stay-at-home parents with a life insurance policy. The reason this is a mistake? Stay-at-home parents provide home- and child-related services that would cost a pretty penny if provided by hired help.
For example, many stay-at-home parents are responsible for:
- Housekeeping including cleaning, laundry, and cooking.
- Childcare including “babysitting,” transportation, and healthcare.
- Household planning and management including shopping, making sure bills are paid, and repairs and general upkeep.
The older you get, the more expensive life insurance premiums get — and frankly, neither you nor your spouse are getting any younger. Plus, the longer you wait the more your risk for developing a medical condition increases, and having a health issue can increase your premiums.
Lock in affordable premiums now and save in the long run.
Life Insurance Options for Newly Married Couples
So, now that you know why you need life insurance, let’s talk about the kinds of available life insurance policies out there.
Term Life Insurance vs. Permanent Life Insurance
The two main types of life insurance are term life insurance and permanent life insurance.
- Term Life Insurance: Gives you coverage for a specific time period (the “term”). Premiums are generally affordable but increase when you renew.
- Permanent Life Insurance: Gives you coverage for life. The most common type is whole life insurance. Premiums are generally more expensive but stay the same. Policy offers a savings and investment vehicle as well as a way to plan for inheritance and estate planning.
Joint Life Insurance Policies
Not to be confused with a group life insurance policy, such as what you get with an employer, a joint life insurance policy covers both spouses. Typically, you can get a joint life insurance policy in either term or permanent, but joint policies are more commonly sold in permanent varieties.
Additionally, joint insurance policies come as:
- First-to-Die Insurance: The beneficiary receives the death benefit upon the death of the first person. The policy ends after that.
- Second-to-Die Insurance: The beneficiary receives the death benefit after both spouses die. (Obviously this means neither spouse is the beneficiary.) Usually, second-to-die insurance is used to make sure the couple’s children are taken care of (as well as can pay any estate and inheritance taxes).
While available, joint life insurance policies aren’t as widespread as individual policies because they’re really only beneficial to a small demographic of customers. Because of that, and how involved they are, it’s best to work with a financial advisor when planning a joint life insurance policy.
How Much Life Insurance Do Newly Married Couples Need?
The simple answer is that you need as much life insurance as will supplement the lost income and services. Figuring that out, however, can be a bit more complicated.
You need to take into account:
- How much lost income you want to replace.
- Your and your spouse’s financial obligations.
- The kinds of services your spouse might have to purchase.
We go into more detail on these in How to Buy a Life Insurance Policy.
Financial advisors and life insurance agents are great people to help you wade through your family’s finances and determine how much life insurance you and your spouse need. Additionally, many insurance providers feature life insurance calculators on their websites, which are helpful tools when you begin shopping for quotes.
- There are several reasons for newly married couples to buy life insurance including replacing lost income to help a surviving spouse take on combined debt and raise children.
- Newly married couples can purchase the same kinds of life insurance as anyone else, and some couples will find it beneficial to buy joint life insurance policies.
- The amount of necessary life insurance will vary from couple to couple; everyone should take into account the amount of lost income and financial obligations.