Each year in America remarriage becomes more common. If you’re hearing wedding bells again, there are many things to think through. One of the more important things is your life insurance. Today we’ll discuss life insurance when you remarry.
Life Insurance for Your New Marriage
You’re likely in one of two situations. Either you already have life insurance or you don’t. Let’s go over things to think about depending on which situation you’re in.
If You Already Have Life Insurance…
If you already have life insurance, who is the beneficiary on this policy? Most likely your ex-spouse.
If you have children together and they’re still young, it may be logical to keep your ex-spouse as beneficiary. Depending on the divorce proceedings, you may actually be required to do so until your children are independent.
If you have no reason to leave your ex-spouse as beneficiary, be sure to update your life insurance beneficiary to your current spouse. Be specific with names instead of simply entering “my spouse” on the beneficiary form.
If you don’t update the beneficiary, the policy death benefit goes to your ex-spouse if you die. A life insurance policy is a binding contract. The insurance company legally is required to act according to the policy. If your policy states your ex-spouse as your beneficiary that is who the insurance company is sending the check to. It doesn’t matter if you’re legally married to someone else. Even if your Will states that you want everything you have to go to your new spouse, a life insurance policy trumps a will.
Do you need more life insurance?
When you remarry, what will your new life situation be like? You may need a new life insurance policy.
Do you and your new spouse plan on having children together? Will you have step-children?
You may need additional life insurance coverage for your new family circumstances. This may mean more insurance and/or a longer term.
You don’t need to cancel your current coverage to get a new policy. You can have multiple life insurance policies to cover multiple financial responsibilities.
John is 50 years old and just married his second wife, Lisa. Lisa is 40 and has a 10 year old son.
John has a $500,000 term life insurance policy with 15 years remaining on the term. His ex-wife is currently the primary beneficiary. John and his ex-wife divorced five years ago. Together they have two daughters, ages 25 and 21.
John wants to continue to financially protect his daughters through college and their young adult lives. They are both responsible young women so he decides to remove his ex-wife as the beneficiary and name his daughters both primary beneficiaries with the death benefit split 50/50.
John also applies for a new $250,000 term life insurance policy. Because Lisa is 10 years younger than he is and wants to make sure she is financially protected until she retires to adequately take care of her son and herself, he buys a long term length of 30 years. He names Lisa the primary beneficiary of this second policy.
If you have no reason to leave your ex-spouse as beneficiary, be sure to update your life insurance beneficiary to your current spouse.
If You Don’t Yet Have Life Insurance…
If you don’t have life insurance yet, it’s time to start from scratch.
There are a few things to think about when considering life insurance:
- What income do you currently contribute to your family?
- What financial obligations do you have that would remain if you died? (e.g. a mortgage, utility bills)
- If you have kids, how many and what are their ages? If you plan to have kids, how many?
- If you have kids, or plan to, do you plan on paying for their college education?
- How many more years until you retire?
Term life insurance is the best option for most families. Answering the questions above can help you determine how much coverage you need and how long your coverage should last.
The main point of life insurance is to replace your income if you die so your family doesn’t financially suffer. Your family’s standard of living is provided by your paycheck. If that paycheck were to suddenly disappear, what happens to your family?
The rule of thumb is to buy enough life insurance to cover ten times your income. But life insurance is not one-size-fits-all. Ten times your income may not be enough or it may simply be unaffordable. Multiplying your income by ten is a good starting point, however, and you can adjust as necessary from there.
Your Financial Obligations
What bills will fall onto your family’s shoulders if you die? Your mortgage/rent payments are the largest and most important expense to consider when buying life insurance. If you died tomorrow, you’d want your family to be able to afford to stay in their home. Selling a home under duress or trying to find a new apartment on top of the emotional turmoil of losing a spouse and parent would be devastating.
Other types of debt to consider when buying life insurance include: private student loans, car loans, credit card balances, personal loans, and home equity loans.
If you have children, how many are still dependent on you? How many years until they’re expected to be financially independent? Do you plan on helping them pay for their education?
Answering these questions can help determine coverage amount and length.
The cost to raise a child is steep. The more children you have, the more life insurance coverage you need. And the younger your children are the longer term length you’ll want to have.
Are you adequately saving for retirement? Many life insurance buyers buy a term length that will insure them until they reach their retirement years. After this, the surviving spouse has retirement savings and Social Security to lean on when you die.
Whether you need a new, second life insurance policy or are buying life insurance for the first time, head on over to our Life Insurance Calculator page to help determine how much coverage you need. If you’re ready to apply, try out our free life insurance quoting tool. You can shop for the term life insurance anonymously without giving away any contact information. When you’re ready to apply, you can complete the online application in just a few minutes. After that, your dedicated Quotacy agent will keep you updated every step of the way.
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