Newlyweds and Term Life Insurance
Newly Weds and Term Life Insurance
Life insurance does not seem to be on the top of the list of things to discuss before the majority of people get married. Shared financial responsibilities and preparation for the unexpected are not the easiest topics to bring up, but planning for a lifetime with your partner extends far beyond wedding plans and where to go on a honey moon. There are hugely influential financial decisions that newlyweds need to discuss (the call that “adulting”) when going from “I” to “us.” This includes deciding whether life insurance is necessary for you, your partner, and your, potentially, growing family.
Choosing Term or Whole Life Insurance
With so many types of policies out on the insurance market today, it is hard to determine which one is the right fit for you and your partner. Whole life insurance coverage extends over your entire lifetime and accumulates cash value, growing over time, that can be borrowed against. These policies tend to be significantly more complicated than term life options and premiums are much higher (85-95% higher, according to financial guru, Dave Ramsey). On the other hand, term life insurance is a practical and affordable way to protect your new partner and growing family’s financial future. Term life insurance, at the cost of a low monthly premium, will pay your spouse, or other beneficiary, a death benefit if something were to happen to you within the time period of your policy.
What Does Term Life Cover? How much do I need?
Though uncomfortable conversations may arise when beginning the venture of purchasing life insurance, compared to dealing with your in-laws, it should be a walk in the park. With your partner, you need to determine how much coverage each of you require to be financially secure if something would to happen to the other spouse. According to many experts, it is suggested to purchase a policy that covers 5 to 10 times your annually salary. That is to say that if you are bringing in $45,000 per year then you should have $225,000 to $450,00 worth of coverage, at the very least. Though this a good base rule for determining the amount of coverage you may need, there are many factors that newlyweds need to consider when planning for their years to come:
For Young Newlyweds:
- How much of your income is needed to keep your spouse financially stable if you are gone
- Your car payments, mortgage, personal loans, and other debts and financial obligations
- Daily living costs such as utilities, rent, phone bills, insurance, taxes, etc.
And if You Have Children:
- Child and daycare expenses
- Education and other extracurricular activity expenses
- Tuition, room, and board expenses for college
- Health, dental, vision and other insurance costs
According to a 2015 study done by Life Happens, an insurance industry nonprofit, and a trade group named LIMRA, over 40% of all Americans and 48% of 25 to 44-year-olds have no life insurance coverage at all! Additionally, 19% only have coverage through work which, often times, is not enough to cover newlyweds’ needs.
Here are just a few reasons why you and your new spouse should consider purchasing term life insurance:
1. You now have more expenses
Now that you are married, you both have growing financial responsibilities. You may be renting a bigger apartment, buying a new car or even a house, and possibly growing your family by having children. Many people would be unable to cover these newly acquired costs with just one income. The biggest reason to purchase term life insurance is for “income replacement.” With this coverage, your spouse and other loved ones can continue on with their lifestyle and long-term goals, without worry, if you were gone.
2. Your debts could fall on your spouse
If you die, any debts that you have remaining will be paid out of your assets or estate. This means that you will be leaving your partner with less money or even in the hole if you have large sums of debt. Additionally, they will be responsible for any joint account debts and may be liable for any debts that you acquired while married (i.e. personal credit card balances). Losing a loved one is hard enough without having to worry about financial security.
3. Coverage gets more expensive as you get older
The phrase “The early bird gets the worm,” certainly applies in this situation. As you get older, you will be quoted for higher premium prices. So start early! Plus, you never know when you may develop some sort of medical condition that could cause your rates to exponentially increase.
© 2017 Janey Smith