When you were single, you may not have felt the need to get life insurance, but once you’re married life insurance should be on your mind. Every financial decision you make, beit your home, car, or kids if you want them, now includes two people and likely two salaries. If you die, how can you best support the people you leave behind?
Life insurance is the best solution for most of us. Here’s everything you need to know about life insurance for married couples. We’ve angled it towards life insurance for young married couples, but it applies to couples of any age.
Is life insurance for young married couples worth it?
You may be young, but you now have someone who depends on you emotionally, and to a greater or lesser extent, financially. As a result, it really is worth considering a life insurance policy once you enter into a long term relationship. It goes without saying that this applies just as much to common-law or de facto relationships.
Life insurance for young married couples is typically inexpensive, as you’re likely to be healthy and unlikely to die during your working years. If you have a life insurance policy from when you were single, it’s probably too small for the needs of your new family. If you can add a rider to your current coverage, adding your partner is simple. If not, you can compare quotes on a new insurance policy.
Before you decide on a new policy, you’ll need to decide which life insurance policy type suits you best, term or whole.
Term life insurance for married couples
Term life insurance is the simplest and probably most common type of life insurance for young married couples. You select a term, typically 10 or 20 years, within which time your partner will receive a payout if you die.
As with individuals, the premiums on term life insurance for married couples generally increase at each renewal, sometimes by a lot! If you’re healthy at your renewal date, you should re-qualify to save money – that generally just means doing a medical exam. You may also be able to save money by getting a new insurance policy all together – it pays to shop around. That said, don’t cancel existing insurance until you have new protection in place.
When buying insurance, your premiums are based on your current age. If you plan on having children, you may save by getting insurance now rather than after they’re born. Since insurance premiums are also based on your health, which is unpredictable, you may not qualify for affordable insurance later.
Whole life insurance for married couples
Whole or universal coverage is not a very common type of life insurance for young married couples, as it is most beneficial for high net worth individuals. Whole life insurance covers you for your entire life, so you’re guarenteed a payout one day. As a result, the premiums are much more expensive! The added benefit is the tax-saving investment component.
Unfortunately, the taxdeductions will only be worthwhile if you’re already maxing out your TFSA and RSSP contributions. You’ll need to be earing well into the six figures to be at that stage, especially while you’re young.
You can learn more about whole life insurance here, but it’s unlikely to be the right life insurance for young married couples.
Joint life insurance for married couples
Another option to consider is a joint-first-to-die life insurance policy. These cover both of you, but will pay out the entire policy when just one of you pass away, which can be a better arrangement if you don’t have children, or other obvious beneficiaries.
Joint life insurance polices can sometimes be cheaper than purchasing two separate policies. However, be sure to read the fine print, as your ‘combined age’ could result in you paying more overall. ‘Combined age’ is what your insurance company sets your single policy against, and it’s generally 10 years or more on top of your average age.
It’s a slightly confusing calculation, so the bottom line is to compare quotes for both joint and single policies, and pick the one that makes the most sense.
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Married Life Insurance – other things to consider
Here are answer to some other common questions you might have.
How much married life insurance does a married couple need?
You won’t know if you have enough life insurance until you look at your new financial obligations and goals, which is more complicated in a couple. Check out our article: ‘How much life insurance do I need‘ to learn more.
Do you have cost-effective insurance?
Each insurance policy has administration charges. Buying one larger policy instead of several smaller ones puts more of your money towards protection rather than the insurance company’s overhead. Term life insurance provides the highest death benefit for the lowest cost for temporary needs. Permanent life insurance provides coverage which lasts for life and is designed to be affordable over that timeframe.
Can you get discounts?
If you and your spouse buy insurance from the same insurer at the same time, you may get discounts. If you buy more insurance, you can get volume discounts. Paying insurance premiums monthly is easier for budgeting but generally costs more than paying annually.
Do you have the right beneficiary?
When you were single, you may have designated a sibling or a parent as a beneficiary. Now that you’re married, you probably want the proceeds to go to your spouse. You can get the appropriate forms to change your beneficiary through your advisor or directly from the insurance company.
You can also specify a contingent beneficiary to receive the proceeds if your primary beneficiary dies before you. If you have children, you may want some money to go to them. If they’re minors, you’ll need a trustee. Note that you want to avoid making a beneficiary irrevocable because you then need that person’s permission to make a change.
The bottom line
You’ve taken a major leap in life. While it’s important to celebrate the milestone, it’s also important to get your finances in order. Get some life insurance quotes, see what it costs, and make the investment. It’s a product you pay for, but never want to use. However, if you need to, its value cannot be overstated.
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