Spouses are familiar with, "Til death do us part," but they might not consider the financial implications of that death.
Spouses share their lives and, for better or worse, a lot of their finances. They buy homes and cars together, cosigning on large amounts of debt. They have kids together and plan for their future full of diapers and college. They plan their golden years together.
Having so many combined financial obligations means that when one spouse dies there isn’t just an emotional impact -- there’s a financial one as well. Spouses looking to mitigate that risk should consider buying life insurance – and, even better, buying it together. Here’s how they can do it.
How spouses can buy life insurance together
There are two ways for spouses to buy life insurance together, and both have their benefits.
The first is to buy a joint policy. That’s one policy that covers both partners. You don’t get a discount for a two-in-one policy, but it can limit the hassle of having to apply for two separate policies.
Unfortunately, that benefit is overshadowed by the complications that a joint policy presents.
Joint policies come in two flavors: first-to-die policies, which pay out when one policyholder dies, and second-to-die policies, which aren’t paid out until both policyholders die. Policyholders (and beneficiaries) have to be aware of which type of policy is in place so they know when the death benefit will be made available.
Joint policies can also make divorce messy (or messier). If spouses have individual policies, it’s easy enough to go their separate ways. A joint policy will only cause confusion.
The second way spouses can buy life insurance together is to buy two individual policies at the same time. This is pretty straightforward. You know the life insurance application process? Enter some personal details, add in some health history, and apply? Do that, but twice.
You might think applying twice would be time consuming, but it doesn’t actually take that long, and you can save time when it comes to the paramedical exam. That can be the longest part of the application process, so if you can schedule a technician to come to your home once and do the exam for both you and your spouse, you can shave off a lot of time.
Of course, when you’re applying for life insurance together, you’ll need both partners’ information. You can do this a few ways:
One person can apply and ask the other for relevant health history information. Very unromantic.
One person can apply, but they already know everything about his or her partner and do not need to ask any questions. It’s like an oddly specific version of The Newlywed Game.
You can apply together. Grab a bottle of wine, throw on a Netflix show, and make an evening of it. Sort of like Netflix-and-chill, but more like Netflix-and-contemplate-your-own-mortality.
Buying life insurance for stay-at-home spouses
Life insurance is mostly meant to replace lost income of the primary breadwinner were to die, but that’s not the only role it can play. Families can also benefit from stay-at-home spouses having a life insurance policy.
A stay-at-home spouse may not have an income, but they can play a huge role in the financial well being of a family. Consider what would happen if he or she died. Who watched the kids, who managed the household budget, who cleaned the home? What sort of services would need to be paid for to replace these tasks? Daycare and nannies aren’t cheap.
Buying life insurance for a stay-at-home spouse would require you taking a policy out on someone else – something that’s perfectly legal, no matter how many murder mysteries cast suspicion on it. Again, this will involve you knowing their health information, but they’ll still need to sign the policy to make it official, so it’s not like you can do it without their permission.
Just because only one partner in a relationship works doesn’t mean that only one of you provides value. Don’t overlook buying life insurance for a stay-at-home spouse if your family will feel a financial impact, along with the obvious emotional impact, of their loss.
Getting coverage for a uninsurable spouse
When you’re trying to buy life insurance for multiple people, you might run into a problem: one of you is insurable, but health complications for the other person provide a roadblock. The person might be uninsurable, or providing coverage might be so expensive as to effectively make them uninsurable.
Luckily, that doesn’t have to be where your journey ends. There are a few options for insuring both spouses.
First, make sure they’re actually uninsurable. Use an independent broker (like PolicyGenius!) to shop your policy around. Different life insurance carriers provide different levels of support for different health conditions, so one insurer causing headaches doesn’t mean that another will. You may find out that you have better coverage options elsewhere.
If you’re still having difficulties, choose a life insurance option that doesn’t rely as much on health history. If your employer offers a group life insurance plan, see if your spouse can be included on that plan. Or, look into a no-exam life insurance policy that relies on a health questionnaire rather than a deep dive into health history. You may also get more flexibility with a spousal rider that you can add to your own policy, but usually with much lower coverage than an actual policy would provide.
These options have their drawbacks – namely, they provide less coverage and/or are more expensive than buying a traditional term life insurance policy – but if you need it, having some coverage is better than having no coverage.
What happens to life insurance in a divorce?
Okay, so we’ve talked about what happens how people can get life insurance when they’re together.
But what about when they’re not together anymore?
Divorce can be hard. Life insurance is another wrinkle. As mentioned, a joint policy can be messy, since it’s likely that neither (ex-)spouse wants the other on their same policy. Even if spouses have separate policies, they may not want their ex as the beneficiary.
Or maybe they do.
Divorce doesn’t necessarily mean two people are completely out of each other’s lives. One spouse may still be financially reliant on the other for things like alimony or child support. A life insurance policy ensures that even if they die, they’re providing the support needed for their parents.
There are still some complications involved. For example, you’ll have to decide who will own the policy, and whether or not premium payments should be included in the divorce settlement. The beneficiary will also need to prove "insurable interest" – that is, that they would be financially burdened if their ex were to die. Still, working through these issues is worth it to make sure your family is taken care of.
Getting life insurance is important, and making sure you and your spouse are on the same page in terms of your financial safety net is, too. Buying life insurance together doesn’t have to be difficult, and it can provide peace of mind for both of you for decades to come.