For many people, getting married is more than a ceremony with vows. In addition, married couples often merge bank accounts and other financial assets or liabilities. In some states, in fact, you are equally responsible for any debts and equally entitled to any income.
One of the facets you may have considered as part of your combined financial health is a joint life insurance policy as opposed to having a separate policy for each of you. Like most financial decisions, there are pros and cons to such a move. Here, we will explore the dynamics of shopping for life insurance for married couples to help you make the best decision.
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While you may be familiar with life insurance in general, many married couples who have a life insurance policy when they get married arenāt aware that insurance companies often offer a joint life policy. Instead, couples often carry over their individual policies and simply change the beneficiary to their spouse.
Itās important to understand that joint policies exist. Plus, theyāre often less expensive than keeping two individual policies, especially if those separate policies are with different life insurance companies. Just like having multiple vehicles insured or multiple insurance products with the same company can offer a discount, having a joint life insurance policy can cost less per month as well.
Of course, there are exceptions to this rule. If you or your spouse have significant medical issues, preexisting conditions, are much older than the other, or are otherwise considered high risk, you may find that the cost savings is either much smaller or even non-existent. In such cases, it may be a financially smarter decision to buy life insurance separately rather than jointly.
You might also be able to save money if you bundle different types of life insurance together. Some companies offer discounts for policyholders who add a term life policy when they already have a universal or whole life policy, for instance, or if they have multiple policies together.
With a whole life policy, a type of permanent life insurance, you are covered until your death. The rates do not change throughout your life. Most whole life policies offer a ļ»æļ»æcash value that grows over time based upon your paid premiums. If you find yourself in need of cash for your childās education, a big purchase, or even if youāre diagnosed with an illness that requires expensive treatment, you can cash out your policy and receive a lump sum or annual payments.
Whole life, however, shouldnāt be used solely as an investment vehicle. While the growth and withdrawal are both tax-free (since your premiums are paid out of after-taxed monies), the rate of return is generally lower than you would find with other investment opportunities such as stocks, mutual funds, or IRAs.
Universal life policies, like their whole life counterparts, offer a cash value. Additionally, however, they offer a few extra benefits. You can use the cash value, once itās high enough, to pay your monthly premiums if you choose.
SomeĀ life insurance companies also allow you to change your coverage amounts without ending your current policy and taking out a new one. This can be convenient if your financial needs have changed. You can also sometimes borrow against that policyās cash value, much like you might take out a loan against your 401(k) retirement plan.
Variable life policies also have a cash value, but where they differ from whole life or universal life policies is that the cash value account is invested, netting a larger rate of return. The investments are in subaccounts, which act like mutual