Life insurance assures you that your family will be cared for if something happens to you. Often individuals with no financial dependents or financial obligations won’t need life insurance, but if that’s not you, then you might want to start considering different life insurance options. If you already have a policy, you may want to add your spouse to your life insurance. When you and your spouse have life insurance, you can ensure financial security for the future should anything happen to you. In this article, we break down how to add a spouse to an insurance policy.
Why Should New Married Couples Have Life Insurance?
As a couple, you’ve worked hard to build a life together. You have to manage your day-to-day expenses as a couple, and you may have a mortgage and children or other dependents. Should you pass away, you want to ensure that your family can continue to maintain the life that you have built. Consider the following reasons for taking out a life insurance policy.
Paying off Debt
If you and your spouse have debt together, such as personal loans, a mortgage or college debt, your partner will have the sole responsibility for paying off this debt should you pass away. A life insurance policy will help ensure they can handle the payments after you’re gone. It can allow them to pay off the debt and relieve the financial stress and pressure.
Managing Daily Expenses
If you are the primary income earner in your house and you pass away, the remaining financial burdens may be passed on to your spouse. Having life insurance can spare your partner this hardship. If you have children, consider choosing a policy that will replace your income until they reach the age of maturity.
More Affordable Early On
For young newlywed couples, purchasing a life insurance policy early in the marriage is in their best interest. As you age, life insurance policy costs rise due to age-related concerns. Buying a policy while you’re still young will help you to secure a lower premium early on.
Can I Add a Spouse to My Policy?
Yes, you can add a spouse to your current insurance policy — this is known as a spousal rider. Adding a spouse provides them benefits should you pass away while the policy is still active or while you are an active member. The benefit is typically smaller than if your spouse has a policy of their own.
A spousal rider may be a more affordable option for spouses, especially if your spouse is older or has health issues that make it difficult to get their own policy at an affordable rate. There is a downside to a spousal rider. If the couple gets divorced, the rider will lose these benefits, so it may be more beneficial for a spouse to have their own policy.
There are two types of insurance policies that couples can choose from — a joint life insurance policy and a separate life insurance policy.
Joint Life Insurance Policy
Joint life insurance is a single life insurance policy that covers two people. Life insurance companies typically only offer this coverage to married couples or domestic partners. This type of policy is a good option if a spouse is unable to qualify for their own separate policy. These are generally permanent life insurance policies, but some come as term policies. It’s important to note that they also offer less flexibility than individual policies.
Joint life insurance policies come in two forms. A first-to-die policy stipulates that when the first spouse dies, the surviving spouse receives the benefit. This is the more expensive option. After you pass away, your surviving spouse needs to purchase additional coverage if they want to maintain it. The second option is a second-to-die policy that pays out when both spouses die. Couples often choose this option when they want the policy to pay out to children or other surviving dependents.
Separate Life Insurance Policy
A separate life insurance policy covers one individual and will pay out to beneficiaries when the policyholder dies. Unlike a joint policy, separate life insurance is not tied to marital status or domestic partnership. There are two types of life insurance policies — term and permanent. A term policy covers you for a set period, usually between 10 to 30 years, while a permanent policy covers you for your entire lifetime.
Having separate life insurance policies enables each spouse to choose from various options and customize each to their needs.
Which Policy Is Best for You?
The policy that you choose will depend on your family’s needs and income. You need to understand your basic financial requirements as a couple and decide what you need from your life insurance. Having separate insurance policies will enable better customization, like letting you choose different policy types and coverage amounts.
A joint life insurance policy may be your best option if you don’t have specific preferences or coverage needs, as you’ll have one insurance bill to cover instead of two. It’s also beneficial if you have mutual needs as a couple, such as paying off large debts or a mortgage.
How to Calculate How Much Life Insurance You Need
Many insurance companies recommend calculating your coverage needs by multiplying your annual salary by 10. For example, if you earn a yearly salary of $60,000, multiply it by 10 to get a coverage of $600,000. You can also use a few other methods to find your recommended maximum coverage amount.
- Years until retirement: If you earn an annual salary of $60,000 and have 20 years until retirement, you may consider a maximum coverage of $1,200,000.
- Standard of living: This method is based on the amount the surviving spouse would need to manage daily expenses and maintain their standard of living. You take the amount and multiply it by 20. The spouse can then withdraw 5% from the death benefit each year and invest the death benefit amount.
- DIME (Debt, Income, Mortgage, Education) method: If you have children, this method ensures that your spouse has the money they need to cover payments such as your mortgage, the children’s education and other debt until your youngest child is 18 years old. It will also replace the monthly income that would have gone toward covering your family’s daily living expenses.
Get Life Insurance for You and Your Spouse With Strock Insurance
You can add your spouse to your life insurance to give them the financial assurance they need should anything happen to you. If you have a large debt, a mortgage, car repayments or young kids, having life insurance will keep the surviving partner from financial hardship should one of you pass away. When calculating your coverage, remember to choose an amount that covers your debt and daily expenses while accounting for your lost income.
At Strock Insurance, we are committed to helping you find the right life insurance policy for your family. We are a leading insurance company in central Pennsylvania and are proud to offer you affordable life insurance solutions. Get the coverage you need — contact us today to get a quote!
