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 arenât 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.
Itâs important to understand that joint policies exist. Plus, theyâre 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 ï»żï»żcash value that grows over time based upon your paid premiums. If you find yourself in need of cash for your childâs education, a big purchase, or even if youâre 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, shouldnât 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 itâs high enough, to pay your monthly premiums if you choose.
SomeÂ 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 policyâs 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 funds but are only available within the context of that policy.
All three types of whole life insurance will cover you for your entire life, as long as your premiums are paid. You can also add riders, or additional benefits, that can offer additional coverage like long-term care or extra funeral funds.
With a term life insurance policy, you are covered only for a specific time period. A term life policy is usually 10, 20, or 30 years, and your premium amount is fixed for that term. At the end of the term, your coverage will lapse. Then, you can either get a new term policy at the current rates for your current age and other risk factors, or you can simply let the policy end.
This type of life insurance is often the most affordable and the easiest to be approved for, but it does not have a cash value. Its cost is based upon your age, health, risk factors, and other concerns at the time of your application that are part of the underwriting process.
The most important part of deciding which type of policy you need is to first understand your own situation. What are your long-term financial goals? How many dependents do you have? Someone who is the sole breadwinner in their home, with a spouse and children to support, for instance, might have different life insurance needs than a couple with no children and a dual income.
Others may need less coverage because they donât own a home or have significant financial assets. Those with a mortgage, student loans, or other obligations may need more coverage. Being honest with yourself and your spouse about what your finances look like can help you better determine what your needs will be. It can make the decision process easier.
Once you know what you need, do some comparison shopping. Donât be afraid to contact multiple companies and compare more than just their rates. Look at benefits, and what they offer in terms of customer service. Read ratings from past customers. You can often get an idea of how long it may take a company to pay out any benefits to you or your spouse in the case of a death claim.
You could see variations on policy options even within the same company. Talk to more than one agent and company. Make sure that you understand whatâs available, how much it will cost, and whatâs required for pre-underwriting, such as a medical exam or blood work.Â
Life insurance can be a critical part of your financial health as a couple or a family. In the event of your death, it can provide your loved ones with the funds to handle funeral expenses. With insurance money, they can also handle outstanding debts and have financial security as they grieve. Your family may also choose to use those death benefits to fund your childâs college education or use it for other needs after youâre gone.
If youâre married, a joint life insurance policy might be a workable financial product for you. Couples who sign up earlier in life often have lower premium payments. Regardless of which type of policy you want, make sure to research companies and options to find the best fit.