Do Married Couples Need to Buy Life Insurance?
September 7, 2008
Death. No one wants to think about, especially a newly married couple. However, thinking about the worse case scenario is an essential trait for maintaining a sound financial plan. There’s no scenario worse than the death of you or your spouse, and that is why you need to prepare for it.
When Should You Buy Life Insurance?
Here are some scenarios where you might want to protect your family with life insurance:
- If you buy a house together as a couple, buy life insurance. If one of you dies, then the other can take the death benefit and either pay off the house or invest it and pay the payment with the monthly interest that it earns.
- When you have kids. If you both die together in a car accident, you need to leave money behind for your children to live a happy and fulfilling life.
- When one spouse is a stay-at-home parent. If the primary income earner dies, the other spouse MUST be left with a death benefit to cover monthly expenses.
What Type of Life Insurance Should You Buy?
For a younger couple in these situations I would recommend level term life insurance. I think cash value life insurance such as whole life, variable life, and universal life insurance are horrible products for the consumer. They attach a cash value account with a death benefit. The problem with these products is that the investment accounts attached to these policies typically yield low returns and come with VERY high management fees.
Honestly, these products only make life insurance agents richer, not you. This is why many financial advisors and life insurance agents recommend these products, because they offer a higher commission than term life products. Term life insurance is only a death benefit of a specified amount for a level amount of time, and the premium is VERY cheap for healthy individuals.
For instance, I just looked on Zander Insurance for an instant term life quote, and I can purchase a 20 year policy for $750,000 for $342 bucks a year! Don’t use a life insurance policy for your retirement investing. Designate mutual funds, index funds, and real estate for your retirement nest egg.
How Much Should You Buy?
Buy 8 to 10 times of your yearly income. So, if you make $50k a year, then you should buy $400k to $500k in term insurance. The idea here is that your spouse could take that money, invest it in good mutual or index funds, and replace your monthly income with the monthly interest from the lump sum death benefit.
Where Should You Buy It?
You could try and inquire separately with companies like Met Life or Zander Insurance or you could check with your local insurance agent or financial advisor that you trust. Another option is to check online with an established company for life insurance quotes.
I told you this would be a topic that you didn’t want to read about! It’s okay. The only things certain in life are death and taxes. Face reality and prepare for the worst. You owe it to your family.
If you think your family needs a life insurance policy and are looking for ways to pay for it check out the marriage budgeting tips and coverage of joint bank accounts for married couples to help make a plan and work together towards it.
This coverage of buying life insurance in marriage is part of the Marriage Money Guide.
All posts by Erik