The family that buys life insurance together, stays together, right? That’s not your typical cliche, but a lot of our customers believe it. If you’re buying life insurance for yourself, they think, why not try to get it for everyone? But is it possible to buy life insurance for your entire family, partner and children included?
Step one: covering your partner
We often have customers who wonder if it would be cheaper to cover both themselves and their partner using one life insurance policy. The short answer: maybe, but probably not.
There are life insurance policies that cover both people in a marriage. Known as joint life insurance policies, these types of policies are typically permanent universal life insurance. Permanent life insurance policies are hybrid products that combine insurance with some type of savings or investment component, called the "cash value." While some joint life insurance policies are term policies — our preferred type of life insurance — we can’t suggest joint policies as a whole because the majority are permanent life insurance products.
Instead, we think it makes a lot more sense to buy two separate term life insurance policies. Why? For starters, it’s usually cheaper than buying a joint life insurance policy. Term is typically four times less expensive than permanent, so even if you buy two policies, you’re saving about 50%. For a detailed look at both the pros and cons of joint life insurance policies, check out our guide.
Step two: covering your kids
While most people don’t buy life insurance for their kids, there are legitimate reasons to do so. A small death benefit can help parents pay for the funeral and can help them take time off work to grieve. While no kid needs a million dollar life insurance policy, a small death benefit of a few thousand dollars can make a huge difference.
There are two major ways to buy life insurance for children. You can either buy a specialized child life insurance policy or you can purchase a child rider for your term life insurance policy.
Let’s dive into the first option. Child life insurance policies are basically whole life insurance policies with a different marketing spin. Whole life policies, a type of permanent life insurance, are both life insurance policies and a savings vehicle. Many salespeople convince parents to buy child life insurance policies with the idea that it will help their child pay for college, or otherwise build a nest egg for their child once they become a young adult. But child life insurance is not a good investment or savings vehicle, especially if you want to save for college.
The second option, a child rider for your term life insurance policy, makes a lot more sense. Child riders are super cheap — often only $5 per year for every $1000 of coverage. That puts the cost of $10,000 of coverage at about $4.17 per month. On top of that, a single child rider will usually cover all of the children in your household. Child life insurance policies, on the other hand, operate on a per-child basis. This makes child riders significantly less expensive than child life insurance.
As you can probably tell, we highly suggest that you purchase a child rider instead of a child life insurance policy. There is, however, one exception to the rule. If your child is highly likely to develop a medical condition that would make buying life insurance later in life more difficult, then you should buy a child life insurance policy for them now. This protects their insurability for the future.
Now everyone’s protected
With a term life insurance policy for every adult in the house and a single child rider for all of the children, the entire family is covered. Term life insurance can protect your family from the costs of unexpected death — funeral costs, an unfinished mortgage, unpaid student loan debt, lost income, future college savings — and a child rider can help parents take time to grieve without worrying about money. Taken together, these two tools help protect the whole family in the event that one of their family members passes away prematurely.