How Does Spouse Life Insurance Work?
Spouse life insurance is a type of life insurance policy that pays a death benefit to the surviving spouse. The policyholder pays the premiums and is the primary beneficiary, but can also designate other beneficiaries, such as a child.
Types of Spouse Life Insurance Policies
There are two main types of spouse life insurance policies: term life insurance and permanent life insurance. Term life insurance is the least expensive but only lasts for a certain number of years. Permanent life insurance, also known as whole life insurance, provides coverage for the spouse’s entire lifespan and offers a cash value component.
| Policy Type | Pros | Cons |
|---|---|---|
| Term Life Insurance | Least expensive | Coverage expires at the end of the term |
| Permanent Life Insurance | Provides lifetime coverage and cash value component | More expensive than term life insurance |
Choosing the right type of spousal insurance policy depends on your financial situation, investment strategy, and the type of coverage you want.
Joint Life Insurance Policies
A joint life insurance policy is a single policy that covers two people, typically offered to married couples or domestic partners. Joint policies come in two forms: first-to-die and second-to-die. A first-to-die policy pays the death benefit to the surviving spouse as the primary beneficiary, while a second-to-die policy pays the death benefit after both spouses pass away for the benefit of other surviving beneficiaries.
Buying Spouse Life Insurance
There are three primary ways to buy spouse life insurance: through an employer’s supplemental life insurance, adding a spouse rider to an existing or new policy, or shopping around for the best life insurance companies for a spouse or partner.
Calculating Spouse Life Insurance Needs
The amount of life insurance someone needs depends on how much income or other support the insurance needs to replace to provide for loved ones. A rule of thumb is to multiply annual income by 10 and add it to all debts. For a more individualized calculation, use the DIME formula:
- Debts
- Income replacement
- Mortgage
- Educational expenses
Spouse Life Insurance for Domestic Partners
Spouse life insurance may also be available to domestic partners, but the availability of joint policies may vary depending on state laws and insurance companies.
Overall, spouse life insurance policies can provide valuable protection and peace of mind for married couples and domestic partners.
