Life insurance can be a worthy investment for many because it offers loved ones significant financial protection if the policyholder passes away while the policy is active. According to LIMRA’s 2022 Insurance Barometer Study, 44% of respondents say they would experience financial hardship within six months if their primary wage earner passed away. Many couples and families only get one life insurance policy, usually to replace the primary breadwinner or highest earner’s income. But some couples may find it best to both get life insurance.
This article will explore some situations where it makes sense for you and your partner to each get a life insurance policy. Then, we’ll dive into a few policies for couples to consider, including term life insurance, permanent life insurance, and final expense insurance.
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When it makes sense for both partners to get life insurance
Although it’s common for only one partner to have a life insurance policy, there are several situations where it can make sense for both partners to get insured. Here are a few:
1. Both partners work
Life insurance can be an excellent investment if you and your partner both work. It can replace income if one of you passes away early. Plus, life insurance premiums may be more affordable since both earn income to pay for them.
2. One partner is a stay-at-home parent
A stay-at-home parent may not always have an income, but they play a vital role in maintaining the household and raising the kids. A life insurance policy can help pay for household and childcare costs, such as a nanny, if the stay-at-home parent passes away early. As a result, the remaining parent will not have to sacrifice income by reducing hours or leaving their job to care for the kids.
3. The couple is retiring
If both partners are retiring, life insurance can become a key component of their financial plans. If one partner passes away while their policy is active, the other spouse gets significant tax-free financial assistance from the death benefit.
The tax-free nature also makes life insurance a key part of estate planning for retiring couples. They can name their heirs as life insurance beneficiaries, allowing heirs to receive more wealth by potentially reducing estate taxes.
Life insurance policies for couples to consider
If you and your partner believe you both need life insurance, here are some types to consider:
1. Term life insurance
Term life insurance is cheap and provides coverage for a fixed time, generally 10 to 30 years. Your beneficiaries receive your full death benefit if you pass away while the policy is active. If you outlive your term life policy, you will have to get a new policy to continue coverage.
2. Permanent life insurance
Permanent life insurance comes with higher premiums than term life insurance, but coverage never expires. Plus, part of each premium goes into a cash value growth component that grows tax-deferred at a certain rate depending on the type of permanent life insurance policy.
When the cash value grows large enough, you can withdraw from it or borrow against it with excellent loan terms. You get the total cash value minus surrender charges if you surrender your policy.
3. Final expense insurance
Final expense insurance is a small permanent life insurance policy that covers end-of-life expenses, such as hospital bills, long-term care, and funeral costs. Final expense insurance death benefits are smaller than traditional permanent life insurance policies. However, premiums are also cheaper, coverage doesn’t expire, and you can still build cash value.
The bottom line
Getting two separate policies can work for a variety of life and family situations. Dual-income couples may get policies to replace each other’s income, whereas a stay-at-home parent might consider life insurance to cover childcare and household costs in their absence. Meanwhile, retirees may both get policies to protect each other and maximize the assets their heirs receive.
Regardless of your situation, you have some flexibility because you can get a different policy type. For example, one of you can get a permanent life insurance policy to build wealth and guarantee coverage, whereas the other can get final expense insurance to save money and cover end-of-life costs.
Whichever policies you choose, make sure to shop around for quotes and see if you can get any discounts by getting policies from the same insurer. Taking these steps helps you maximize your coverage for your budget and needs.
