Life insurance is a major part of every family's financial protection plan, so, chances are, if you're shopping for coverage, so is your spouse. Fortunately, it's easy to tackle this to-do together. Here are seven tips for spouses shopping for life insurance.
1. Term life fits most families' needs
Most shoppers are best served by term life insurance, which covers you for a set number of years, then expires. It's much more affordable and less complex than whole life insurance, which lasts until you die or stop paying premiums. Learn more about term vs. whole life insurance.
2. Separate policies are usually your best bet
Similarly, most spouses are best served purchasing separate term life policies. That way, they can tailor the length, coverage amount and fine print to meet their individual needs. Policygenius helps spouses save time and shop for separate or joint policies together. You can get started by comparing life insurance quotes.
3. Understand your joint policy options
Joint policies are whole life policies that insure two people. If you decide to purchase a joint policy, know the difference between your two major options:
A first-to-die joint policy pays out upon the first policyholder's death. Surviving spouses need to apply for a new policy if they still want coverage.
A survivorship policy, also known as a second-to-die policy, doesn’t pay out until both policyholders are deceased.
First-to-die policies are generally more expensive, but survivorship policies often provide inadequate income protection since they only pay out once both policyholders have died.
4. Use your major financial obligations to calculate coverage
We recommend a needs-based approach to determining how much life insurance to buy. First, tally your current debts, monthly living expenses and income, then multiply that amount by the number of years your family will rely on you to meet those obligations. Consider financial obligations down the road like college tuition.
Next, subtract your current assets, including any life insurance policies you already own (like employer-sponsored coverage). Our life insurance calculator can provide a tailored coverage recommendation.
5. Stay-at-home parents need life insurance, too
Stay-at-home parents don't make tangible income, but they do provide childcare and perform other invaluable services the breadwinner would have to cover in their absence. Fortunately, there are a few ways for families to account for this gap. The breadwinner can add a spousal rider to their policy or the caregiver can get a small term policy of their own.
6. Leverage the ladder strategy
Many families save money by "laddering" multiple life insurance policies on top of each other. That way, each policy expires at a different time. This strategy allows you to lock in lower rates while young, but slowly reduce coverage — and the associated premiums — as you age and require less protection. Learn more about the ladder strategy.
7. Re-consider naming your child as a beneficiary
Children's are one of life's greatest joys, but they make terrible life insurance beneficiaries, largely because life insurers have to jump through major legal hoops before paying death benefits to a minor. The skinny: Unless you've done some homework and named a custodian, a probate court will have to appoint a guardian to control the death benefit until your child turns 18, 19 or 21, depending on your state.
Most married couples name their spouse as a policy's beneficiary. (In fact, some states have laws that make it hard not to.) If the law permits and you wish to name a child as a beneficiary, set up a trust or designate a guardian simultaneously to preclude a payout from getting held up in court.
Disclaimer: Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.