Building a future together takes work, but it’s worth it. When planning the future, things to figure out include where you’ll live, what type of house you’ll buy, how many children you want, what size car you need. Do you get a dog, a cat, or both? Let’s discuss your spouse and life insurance.
But you need to plan for the not-so-fun things as well. We never know what tomorrow may bring. You need to also make a plan to ensure your financial futures are secure, no matter who dies first.
Are you both still working?
If you’re both still working, you need to make a plan to replace the income. When one of you dies, your expenses don’t change much.
You still need to pay the mortgage, taxes, utilities, insurance plans, etc. If you have dependent children, your expenses go above and beyond typical household bills. The main thing that changes is that you now need to pay these things with only one income—and you need to pay for a funeral.
When your spouse dies, you are entitled to survivor’s benefits through Social Security. However, if you’re under full retirement age and still earn an income, these benefits are greatly reduced.
This is one reason why owning term life insurance is very important during your working years.
Term life insurance isn’t dependent on anything except making sure premiums are paid on time so it doesn’t lapse. If your spouse dies and you’re still working and under retirement age, it will pay the full death benefit. If your spouse was recently terminated or voluntarily left their job, and then dies, they may have lost their group life insurance, but a term life insurance plan would still pay out.
Term life insurance is an affordable way to protect your family’s livelihood and standard of living. And both spouses should have life insurance coverage.
Term life insurance is not permanent. It lasts a specific period of years that you choose. This is the term length. Depending on your age, term lengths can vary from 10 to 40 years. Ideally, you want the coverage to last until you’re in your retirement years.
Are one or both of you no longer working?
If you’re already retired, it’s time to sit down and go through your finances. Are your savings and retirement accounts solid? Can your spouse live comfortably without you?
If you’re both receiving Social Security benefits and one of you dies, the surviving spouse can’t receive both their own SS benefits and survivor benefits. Social Security will pay the higher of the two.
The survivor benefit amount is based on the earnings of the person who died. The more the worker paid into Social Security, the greater the survivor’s benefits will be.
Social Security uses the deceased worker’s basic benefit amount to calculate the percentage survivors can get. If the worker who died was getting reduced benefits, SS will base the survivor’s benefit on that amount.
In most typical claims for benefits:
- A widow or widower, at full retirement age or older, generally gets 100% of the worker’s basic benefit amount;
- A widow or widower, age 60 or older, but under full retirement age, gets about 71-99% of the worker’s basic benefit amount;
- A widow or widower, any age, with a child younger than age 16, gets 75% of the worker’s benefit amount; or
- A child gets 75% of the worker’s benefit amount.
After reviewing your finances, if it’s determined that a spouse may financially suffer without the other, consider life insurance if you don’t yet have it. Depending on your age and health, a new life insurance policy may not be out of the question.
|$250,000 10-Year Term Life Insurance Average Monthly Premiums for Males and Females (non-smoking risk classes)|
|Preferred Plus||Preferred||Standard Plus||Standard|
As you can see from the table above, it pays off to buy life insurance earlier rather than later in life. Your health will affect what risk class you’re put in (Preferred Plus, Preferred, Standard Plus, or Standard) which affects pricing as well.
If you or your spouse dies, the survivor’s expenses don’t change much.
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Are you a stay-at-home parent?
Life insurance on the working spouse is imperative. If the working spouse dies unexpectedly, you need to have a plan to replace that income you rely on. You have the option to find a job, but having been out of the workforce for a while, it will take time to find work and get the funds flowing. Life insurance can replace this lost income quickly at a desperate time when you need it most.
But don’t stop there. Stay-at-home parents need life insurance too. Stay-at-home parents take care of many tasks that would otherwise need to be hired out, daycare being the most expensive.
If the stay-at-home parent dies, the working parent will be emotionally devastated but also needs to quickly figure how to disrupt their children’s lives as little as possible. This means taking time off work to be with them and plan for all the unexpected changes. Life insurance can provide funds to ensure this time off work is financially possible. The benefit can also provide funds for daycare, nannies, or whatever is needed for the children.
It makes the most sense for a stay-at-home parent to have a long enough term length to provide coverage that lasts until all the children are at least 18. If you plan on paying for your children’s college education, the coverage should be a longer term.
The amount of needed life insurance coverage varies by family situation. As a general rule of thumb, many insurance professionals advise you to have 10 to 20 times your current income to maintain your loved ones’ standard of living. Because stay-at-home parents do not generate income, on paper it’s difficult to determine how much coverage they can be approved for.
Most life insurance companies would allow a stay-at-home parent to have coverage equal to that of the income earning spouse. If the earner makes a substantial amount of money and has a substantial amount of life insurance coverage, life insurance companies may cut the coverage for the stay-at-home parent in half.
Applying for Life Insurance Together
Thinking about your spouse dying isn’t fun or ideal, but turning a blind eye to the what-ifs can be detrimental to not only your future, but your children’s. If you aren’t involved in your household finances, get involved. If you aren’t sure if your spouse has life insurance, find out.
You both need life insurance coverage. You can own each other’s policies or own your own. Start the process by getting term life insurance quotes today.
Quotacy works with couples all the time. We’ll keep you both updated as your applications move through the buying process.
When applying, it’s best to use separate email addresses so the updates don’t get confusing. Not all applications move at the same pace depending on the individual factors at play.
Also, if either of you has a risk factor, such as diabetes or high blood pressure, don’t be surprised if your Quotacy agent reaches out with some extra information. Not all life insurance companies evaluate risk factors in the same way. When you’re both applying online, you may both choose the same insurance company.
For example, referring to the image of our online quoting tool below, you both may choose to apply with AIG simply because you recognize the brand name. After submitting your online applications, your agent reviews both before sending them to AIG.
If your agent sees a risk factor on your application that we know from experience will be treated more favorably by a different insurance company, we’ll reach out to you (not both you and your spouse) and set some realistic expectations. Your agent may suggest you switch to the second company for a better offer. But it’s completely up to you if you want to switch or not.
Quotacy is a life insurance broker and we operate independently from any insurance company. Quotacy is here as your advocate to help you get the best life insurance coverage to protect you and your family.
Note: Life insurance quotes used in this article accurate as of December 7, 2020. These are only estimates and your life insurance costs may be higher or lower.
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