Married Life Primers

Life Insurance: The Complete Guide for Married Couples

Illustration by Dorothy Cury

There are those times when you think you’re finally a grown-up, and then there are those times you know you’re a grown-up. Buying life insurance as a married couple is one of those moments when you realize, “yup, I guess I have to take my head out of the sand now.”

Now’s the time to invest in the future. For one, buying a term life insurance policy when you’re young and healthy can lock you into a low rate for the length of the policy term, which may be up to thirty years. For another, with marriage come some major life decisions — like potentially buying a house or having kids — that directly impact where and how your income is spent. Even if you and your future partner keep money separate, buying a life insurance policy and naming her as a beneficiary means that your mutual hopes and dreams are financially protected if you kick the bucket.

Death may not be a fun topic to think about (interestingly, that’s what “life” insurance is all about). But getting educated on life insurance now should give you peace of mind — and may help you avoid a lecture on the topic from your dad or future father-in-law (another universal grown-up truth: the older we get, the more we seem to love giving unsolicited advice).

What exactly is life insurance?

Like other insurance options, life insurance is built upon the fact that you don’t want the worst to happen — but the policy will provide if it does. In the case of life insurance, a policy constitutes a contract between you and an insurance company. You agree to pay premiums (premiums can be paid annually, quarterly, or monthly, with some companies offering a discount for those policy holders who choose to pay annually, due to lower administrative fees on their end) ), and in return, the insurance company will issue a payment to your designated recipient if you die.

This is to assist loved ones, including your spouse, with funeral expenses and debt payments (such as mortgage costs) and potentially give them a financial cushion to continue saving for college, providing for children, and maintaining the quality of life they had when they could depend on your salary (technically there will be one less mouth to feed and body to clothe — yours — which could improve their quality of life relatively speaking, but that’s a bleak way of looking at things).

What Is Term Life vs. Permanent (Whole or Universal) Insurance?

There are two main types of life insurance options: Term life and permanent (also known as whole or universal) life. Term life tends to be the easiest to understand: You pick a set term — 10, 20, or 30 years — and pay premiums each month. Once the term ends, so does the policy. This policy can protect your loved ones during your active earning years, when you and your family may have large bills to pay, such as mortgages, car payments, or college tuitions. The idea is that once the term ends, you may have assets that would allow your spouse and surviving family members to be financially comfortable even if you were no longer around.

Let’s say you pick a 30-year term policy valued at $500,000 and name your wife as a beneficiary. Ten years later, you die. At that point, your wife will have a choice: Receive a lump sum (tax free) payout from the life insurance company, which she could use to continue to pay the mortgage, save for college, pay for her second wedding (we kid, we kid!) … but the point is, the payout will help provide for her and give her a safety net and flexibility as she navigates life without you.

When a term policy is paid out, that means that your beneficiary no longer pays premium and the “term” is cancelled. Your beneficiary may also choose an installment payment plan, which are paid from an interest-earning account. (Taxes may be owed on interest earned.) Your wife may choose this option if, say, she’s a high earner and you and she both paid off the mortgage, had college savings, and other assets at the time of your death. But you don’t need to choose a lump sum or installment plan now — that’s something a beneficiary decides when the policy holder dies.

The alternative — permanent policies, such as whole and universal life policies — don’t have term limits, and offer a savings and investment option that allows you to access a portion of the money while you’re still alive. The premiums for this type of policy often are more expensive than a term policy.

Does getting married mean I need life insurance?

No, it doesn’t.

Sometimes Marge knows best. (via GIPHY)

Plenty of single people purchase life insurance policies and name their parents, siblings, or even a friend or a charity as a beneficiary, aka the person who gets the money when you die. But since marriage usually means you’re combining finances and becoming fiscally dependent on each other, it makes sense for you to get a policy. It also makes sense for your spouse to get a policy, even if there’s an income discrepancy or they plan to stay at home once you have kids. That’s because a life insurance policy is independent of income (as long as you can afford the premiums) and can help cover the cost of running a household if you or your spouse were not there to cover the childcare and household maintenance fees.

In addition, whether you’re buying a term or universal life insurance policy, it makes sense to do so when you’re young and healthy — and unlikely to die. Sure, car accidents, illness, or shark attacks can happen to anyone. But an insurer bases a premium on your age, as well as a medical exam, and other factors including how much risk you have in your daily life. Wait until you’re older, and an illness or even just your age could make your rate skyrocket (see the discussion of actual rates below).

Should we get joint life insurance?

So, should you and your wife get joint life insurance? Probably not. Even if you’ve already cozied up all your finances, getting a joint life insurance policy instead of two individual policies may not be the best idea. For one, it can be hard to find a joint policy for term life insurance. Second, while there are products available for joint permanent life insurance — typically called “first to die” and “second to die” insurance, they minimize flexibility and options for both of you, and may not be that much less expensive than two individual policies. In first-to-die policies, the policy is paid once the first spouse dies and then the policy is void, leaving the second spouse without life insurance. In second-to-die policies, the policy is paid once both parties have died, usually to adult children named as beneficiaries. These policies can get complicated. For example, while you can change beneficiaries on an individual policy quite easily, it can be a legal maze to change beneficiaries on a joint policy when divorce or death happen.

Don’t I have life insurance at my job?

You may, but it may not be adequate — and it may expire as soon as you leave the company. You can have an individual life insurance policy as well as a group policy through work, which means if you were to die, your beneficiary would receive the payout from both policies. Life insurance policies through employment vary, but a common benefit (aka what your beneficiary would be paid if you were to die) is about $50,000 to $100,000. Sounds like a lot until you consider that this money needs to cover funeral expenses and debts, as well as ongoing bills, like mortgage and car payments.

In general, experts recommend that you choose a benefit that’s 5 to 10 times your annual salary, depending on what your benefit would need to cover.

How do I get an insurance quote and buy a life insurance policy?

Worried that “buying life insurance” requires taking a day off work, like closing on a house or getting a root canal? Don’t worry: More and more companies are offering online term life insurance applications, which allow you to fill out your info, get a life insurance quote  and finalize the paperwork. Most life insurance policies do require a medical exam for underwriting, but these are NBD. They can be done at your work or home, are completed by a medical pro contracted by the life insurance agency, and usually require nothing more invasive than height, weight, peeing in a cup, and some blood work. Online options also offer immediate rate estimates based on a few questions about your health, habits, and age, which can help you compare options (if you smoke, for example, expect life insurance to be most costly).

Universal or whole life insurance policies may require more legwork, as well as working with an insurance agent or broker, but the process shouldn’t be onerous. I mean, you’ve already discovered the difference between Princess Cut and Pear Cut engagement rings, so this really is a piece of cake.

Do I have to read the entire policy?

It’s important to understand what you’re purchasing — and what is and is not covered. For example, some term policies only cover accidental death (read: getting hit by a truck), while others cover death resulting from illness, like cancer or other diseases. This distinction can be a key one, since certain diagnoses may make it harder to purchase life insurance in the future, or can make premiums more expensive. But if you purchase, say, a 30-year-term life insurance policy while you’re healthy, you’ll still be paying the same amount each month 29 years from now — even if by then, your health chart has reached the thickness of the seventh Harry Potter book.

How expensive is a life insurance policy?

Life insurance is serious, and the coverage numbers — $500,000, $1,000,000 — sound like a lot. That said, the actual cost of a term policy can be similar to your Spotify subscription. While the cost of a term policy varies depending on individual factors, it’s not uncommon for a healthy guy in his mid-twenties to mid-thirties to pay $15 to $30 a month for a $250,000 policy. Your wife is likely going to pay less. Why? Because women have a longer life expectancy than men, and because common illnesses like cardiovascular disease occur, on average, earlier in men than in women.

Permanent life insurance options like whole life are more expensive, but that’s because these options can be used as a saving and investment vehicle; the money is quasi-liquid (read: you can get it quickly) and can be used for retirement goals and other expenses. Many financial experts recommend against using whole life insurance as a retirement strategy unless you’ve maxed out other investment options. These policies can be four or five times as pricey as a term life policy. For example, a guy in his mid-twenties to mid-thirties could pay about $150 a month for a whole life policy.

It’s crucial to know if you can actually afford life insurance in the long term, since you’re signing up for a ten-, twenty-, or even thirty-year commitment. In general, if you stop paying a premium on a term life insurance option, your policy lapses (there may be more flexibility in a permanent life insurance option). While most insurers have a 30-day-grace period if you happen to forget a payment or something went wrong with billing (and there may be options for reinstating a lapsed policy), ensuring you can pay each month will save you administrative headaches down the road.

Which life insurance company is best?

You could buy a life insurance policy in a matter of minutes. But there’s no guarantee you’d get the best policy for your situation. As with all things financial, do the homework, research the popular insurers, compare life insurance quotes, and yes talk to customer-service reps about this new chapter in your life. To help you get started, we’ve put together a starter list.

Below are the 10 largest life insurance companies (ranked by assets in billions of dollars), according to PolicyGenius. Each company offers some variation of interactive screens that can gauge how much a policy might cost based on your personal information. Note that bigger companies may offer better rates but less personalized assistance.

  1. MetLife
  2. Prudential
  3. John Hancock
  4. New York Life
  5. AIG
  6. Northwestern Mutual
  7. Lincoln Financial
  8. Mass Mutual
  9. Transamerica
  10. Voya

You could also consult a financial planner, as well as websites that aggregate quotes from multiple companies, like AccuQuote and PolicyGenius. If you want to get super-geeky about it, visit AM Best, which was founded in 1899 with the mission to report on the financial stability of insurers and the insurance industry — and which has ratings, financial data and news about 3,400 companies in more than 90 countries. Ratings are based on the financial health of the company (read: the likelihood the company will still be around and available to pay out when you need them) and the grades are school-style: A++ for superior options; D for poor.

So there you have it: The facts of life… insurance.


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