Business & Tech

When Should You Make Your Spouse Get Life Insurance? Patch Advisor

Talking to your spouse about dying is not exactly a bag of laughs. But like a good joke, it's all about timing...

If you happen to live in a film noir movie, or you're a character in a certain vintage of mystery novel, you should be extremely suspicious when your spouse insists on purchasing a generous life insurance policy. This goes double if it comes on the heels of making plans (also suggested by your spouse) for your first-ever skydiving excursion, or an exploratory tour of an active volcano.

But if, like most of us, you live in the actual, nonfiction world, having a spouse who suggests getting life insurance probably isn't a sign that he or she is trying to flee wedlock with a golden parachute. It probably just means you have a prudent and well-informed partner.

Because if you have family members who are dependent on you and the income you provide, you probably need life insurance.

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For financial planners and experts, this advice is obvious and uncontroversial. For the rest of us, acting on this advice might be more of a struggle.

And sometimes in a marriage or partnership, the need for life insurance may be more obvious to one partner than it is to the other.

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David Mendels, a certified financial planner, said that he often sees married couples come in to talk about life insurance because one partner in particular has pressed the issue.

Sometimes, it's the partner who is more dependent on the other's income. Other times, it's just the partner who is more financially savvy or more informed about prudent financial planning.

"Very often, it's the one generating the most income," Mendels explained.

This is understandable; as hard as it can be for an individual to make the choice to buy life insurance, it can be even tougher to tell someone else they need to get life insurance. Talking about someone else's income, as well as their potential death, breaks at least two widely recognized conversational taboos.

But no one should be afraid to talk to a spouse or partner about planning for the worst. Life insurance exists to protect loved ones in the unlikely circumstance that you won’t be able to provide support. Any healthy relationship should be able to handle a frank discussion about managing risk in the family.

In short: if one or both of the partners in a marriage or long-term relationship are materially dependent on the other, and especially if children are involved, it’s time to talk about life insurance.

Who needs a policy, and how much should I buy?

When considering life insurance options, it is simplest to think about what your family would need were you to die unexpectedly.

In most cases, this means replacing any vital income that would be lost. If one partner or spouse brings in the majority of the family’s income, for example, life insurance should be able to replace that person’s income.

Replace it for how long? Mendels says that the size of the policy should be determined by how long it would take for the surviving partner to become self-sustaining.

If the surviving partner is a stay-at-home parent, the life insurance plan should be able to cover all of the family’s income needs.

“But at a given point,” Mendels added, “maybe [the surviving partner] does have the skills so that they can go and generate income.”

This is important, because it’s possible to buy too much life insurance.

“Obviously, the more the coverage, and the longer the time period we’re doing it for, the more it’s going to cost,” explained Mendels.

While you should be prepared for the worst-case scenario, there’s no reason to go overboard. An overly-generous policy will be more expensive on a monthly basis. That’s money you could be investing or spending on things the family would enjoy.

Many different considerations will determine how big a policy to buy:

  • How long it will take for a surviving partner to get to retirement or self-sufficiency
  • How long children may be dependent on the parents
  • The cost of college for children
  • Household expenses and debts (including mortgage)

“All of these have to be traded off against the cost,” said Mendels.

In certain situations, other considerations may be in important. For example, Mendels said that couples sometimes choose to buy on policy on a stay-at-home parent, because this parent’s death could result in extra childcare or household expenses. These plans are typically shorter and smaller than those on parents bringing in a siginficant income.

Parents with children who have special needs also have additional options to consider, because theses children’s need for financial support may extend indefinitely.

Making these decisions can be pretty complicated, especially when you’re trying to balance potential future needs with the present concrete costs of a premium.

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Mendels argued that it can be helpful to work with a financial planner, who can help ensure that you’re not buying a bigger policy than you need.

Whether you work with a financial advisor or an insurance agent, it’s important to know how they are being compensated for their services. Ideally, you’ll pay a flat fee or hourly rate to a fee-only advisor – this way, they’re only working on behalf of you, the client. You don’t want to be speaking with someone who gets a bigger commission by convincing you to buy a pricier policy.

If actually making an appointment with a financial advisor is something you know you’ll never do, you can also just purchase a policy using a quick rule-of-thumb. Some experts recommend just buying a simple term life insurance policy worth 10 or 20 times your annual income. It’s better than nothing.

And it’s also important not to wait too long to buy life insurance. You never know when your family might need it, and if you develop a serious illness or health condition, it will be much more difficult to afford.


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