Spouse Life Insurance

Eric Van Haaften Types of Life Insurance Policies

Where do you even start when it comes to purchasing spouse life insurance?

Not only is there a vast array of policies out there, but each policy offers different levels of coverage that can be confusing.

We will break down the key benefits you should look for when buying spouse life insurance and advise how best to buy the right policy.

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What is spouse life insurance?
What types of life insurance can couples buy?
How to buy life insurance for a spouse?
Can a non-working spouse buy life insurance?

What is Spouse Life Insurance?

Are you a married couple looking for ways to protect your family’s financial future?

An often-overlooked option is spouse life insurance, which can provide a crucial safety net in the event of an unexpected death.

How does spouse life insurance work?

With spousal life insurance, one partner takes out coverage on the other half, giving flexibility and dependable coverage that ensures that loved ones are financially secure after the unthinkable occurs.

You will pay the premiums and are generally named as the primary beneficiary, with children listed as contingent beneficiaries.

Both husband and wife have to be on board because you can not buy coverage for your spouse without their knowledge or consent because it is illegal.

Types of Life Insurance for Couples

Life insurance is an integral part of any couple’s financial plan. It provides financial security and peace of mind if one partner passes away, ensuring that their loved ones are taken care of financially.

Couples have numerous life insurance options, and finding the best fit for your situation can be overwhelming.

We will cover the different policies available for couples and dive into the subtle details so you can make an informed choice about which option is best for you.

Spouse Term Life Insurance

Term life insurance is a straightforward form of protection that can help protect your family’s future if something happens to you or your spouse.

You can purchase coverage for a specified period, usually between 10 and 40 years, with level term life insurance. If either of you dies during this time, the other partner will receive a tax-free death benefit.

Term coverage is the best life insurance policy for married couples that need a substantial death benefit at an affordable cost.

The least expensive type of life insurance is a 10-year term policy which lasts for ten years and then expires. At the same time, 30 and 40-year term life is more costly and last longer.

There are also variations of term life insurance for spouses, including accidental death, decreasing term, and annually renewable term insurance.

An accidental death benefit policy will cost less than term coverage but only pays a death benefit if you die in an accident.

With decreasing term policies, death benefits decrease over a defined period with cheaper premiums. In contrast, yearly renewable term policies provide a level death benefit with increasing annual premiums.

Permanent Life Insurance for a Spouse

Permanent life insurance policies come in various forms and offer lifetime coverage, tax advantages, cash accumulation potential, and more.

Guaranteed Universal Life: A GUL insurance policy has a fluctuating cash value and provides a no-lapse guarantee on both the premium and death benefits.
Indexed Universal Life: An IUL insurance policy allows you to allocate your cash value to fixed or various indexes, such as the Dow Jones, S&P 500, and the NASDAQ.
Variable Universal Life: A VUL insurance policy provides a fixed premium and death benefit with cash values invested in a series of sub-accounts where you can grow or lose money depending on the market.
Whole life: Whole life insurance provides a fixed premium and death benefit for the insured’s lifetime and accumulates cash values and dividends.

Permanent coverage is more expensive upfront because it accumulates tax-deferred cash value and provides coverage for your entire life.

Couples can access these cash value savings by taking withdrawals or loans against an active policy.

Joint Life Insurance for Couples

Joint life is one policy that covers both a husband and a wife. Joint life insurance covers a married couple and pays out when the first person dies (first-to-die) or both covered by the policy pass away (second-to-die).

First-to-die: A permanent insurance policy that pays a death claim when the first policyholder dies, with coverage ending after the first death. These shared policies are hard to find, and it is often better to buy separate policies for both husband and wife.
Survivorship Life Insurance: SUL usually is a permanent policy that covers two people and only pays the death benefit when both parties have passed. Second-to-die coverage can be a helpful estate planning tool or can be used to transfer wealth to children.

Buying Life Insurance For A Spouse

Finding the correct type of life insurance for your spouse can seem intimidating and complex.

You may be wondering what coverage is best for their needs, how much to buy, and if you even need it in the first place.

How Much Spouse Life Insurance?

When a married couple thinks about setting up coverage to provide financial security for their family after they are gone, it can be challenging to know how much life insurance is enough.

Each couple’s specific situation and circumstances vary, so what works for one family may not necessarily work for another.

Married couples should consider purchasing adequate life insurance so the surviving spouse can continue paying living expenses, paying off the mortgage, and financing their child’s education.

A common rule of thumb to estimate how much life insurance you need is multiplying your annual income by ten and adding it to all debts.

For a more individualized estimate, use a popular procedure used in the insurance industry called the DIME Method.

The formula will provide a death benefit amount that is a helpful starting point to determine how much life insurance you require.

Debt – Total bills and credit card debt
Income – Replacement income for the number of years needed
Mortgage- Your current mortgage balance
Education – Cost of all children’s college education

Now that you have estimated the coverage your spouse might need. Let’s look at a few ways to buy coverage.

Select Dependent Life Insurance through work.

Many employers and associations allow you to add your spouse as a dependent for insurance on their group life insurance policy.

Voluntary or supplemental spouse life insurance is an addition to the base coverage offered to an employee in many benefits packages.

Many large associations also offer members spouse life insurance. An example would be AICPA, an association for accountants with a group life insurance program for active members.

Most supplement policies are automatically approved, making it an excellent option for a spouse that doesn’t qualify for traditional coverage.

Group plans have specific limitations on the amount of coverage you can purchase and gets more costly as you age.

Some employers terminate your coverage if you leave, while other group plans have a conversion option if you retire, leave, or get a divorce.

This conversion option allows your spouse to convert to either whole or universal life insurance without taking an exam or undergoing new underwriting.

Buy Individual Spousal life insurance.

You can have more options when buying your husband or wife’s life insurance in the open market from a licensed agent.

You can often buy coverage for a spouse without doing a medical exam, but many competitive companies require a brief exam.

An insurance agent can compare companies and plans so that you find a policy that suits your individual needs and budget.

Because term coverage is more affordable, it tends to be more popular for young married couples.

While permanent life insurance is often a better choice for older married couples with more disposable income to pay more significant premiums.

Your life insurance premiums will be based on age, gender, health, policy type, and required death benefit.

adding a Spousal Rider

A spouse rider can provide life insurance coverage for both spouses on one single policy.

Spousal riders are generally more expensive and hard to find, with many carriers 0nly offering spouses individual policies.

Nationwide and Mutual of Omaha offer spouse riders but will limit the coverage to $100,000 and $25,000, respectively.

Another disadvantage to a spousal rider is losing coverage through either death of the primary insured or a divorce.

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Life Insurance for Stay-At-Home Spouses

Did you know that stay-at-home spouses can get life insurance?

Most married couples assume that only the breadwinner needs a life insurance policy, but all family members should be protected.

A life insurance policy for both partners can help ensure that your loved ones will never find themselves without financial security if the unexpected happens.

Spouse life insurance can help cover the expense of maintaining the family, taking care of kids, and doing housework.

How much insurance a nonworking spouse can secure will depend on each companies underwriting guidelines.

AIG: You can purchase up to $1,500,000 of the working spouse’s coverage at AIG.
Lincoln Financial: You can buy the same amount as the working spouse.
Pacific Life: People under 70 can buy the same amount as their working spouse up to a $3 million death benefit at Pacific Life.
Mutual of Omaha: You can buy the same amount as the working spouse with a limit of $2,000,000.
Prudential: You can buy the same amount as the working spouse with a maximum determined by Prudential.

Life Insurance for Domestic Partnerships

People who are not legally married or engaged to be married are eligible for spouse life insurance coverage.

Domestic partners may need to provide additional information, such as jointly owned assets naming both people, to prove insurable interest in each other.

Insurable interest with life insurance requires a domestic partner to experience financial hardship upon the policyholder’s demise.