Gettin’ Hitched? Better Start Comparing Life Insurance Quotes
While love and marriage often go together like a horse and carriage (as the song goes), the “marriage” aspect of this union often entails much more than just fancy dinners and long walks on the beach. Building a life together often means facing some very unromantic—but necessary—details such as taxes, debts, and even life insurance.
While it might be hard to imagine your beloved passing away, adding “Compare life insurance quotes” to the top of your newlywed to-do list could be one of the most thoughtful—and responsible—gifts you could give your beloved. Because no matter how young or healthy you are, accidents or unexpected illness could leave your partner picking up not only the emotional pieces but also the financial pieces. Purchasing life insurance is a simple way to ensure that your loved ones will be protected for months or even years after you are gone. That’s why we’re sharing our tips to help you avoid common mistakes and ensure your payout makes its way to your partner.
Although you have the right to designate anyone—or any organization—as a life insurance beneficiary, many people list their spouse as the primary one. However, if you took out a life insurance policy before getting married, you might have named someone else such as a parent, sibling, or even an ex-spouse as the primary beneficiary. So if you recently got married, be sure to add your spouse to the list of beneficiaries if purchasing a new policy or double check your old policies to make sure they are updated with the correct information.
Understanding the different categories of beneficiaries is also a great way to avoid having your payout end up in the wrong hands. The most common beneficiary designation for a spouse is as a “primary” beneficiary—or first in line to receive the death benefit. The “contingent” or “secondary” would be next in line—should the primary die before the insured—and the tertiary is third in line. You can have multiple primary beneficiaries if you want to divide up the payout. For example, your spouse could receive 50%, a child 40%, and a charity 10%. Again, if listing multiple primary beneficiaries, make sure the percentage of payout is clearly indicated and that contingent and tertiary beneficiaries are listed in the event one of your primary beneficiaries dies before you do.
Another potential pitfall when comparing life insurance quotes is having three different parties—the policy owner, the insured, and the beneficiary—named on the life insurance contract. While that won’t affect who gets the payout, it will make the payout taxable. For example, if you are both the policy owner and the insured—and your spouse is the beneficiary—your spouse will receive the payout tax-free. But if your employer owns the policy, you are the insured, and your spouse is the beneficiary, then your spouse will have to give a significant chunk of that money to Uncle Sam. In order to avoid the “tax triangle,” make sure that only two names are listed on the contract (usually the policy owner and the insured are the same person).
Considerations For Working & Non-Working Spousal Coverage
Finally, many newlyweds search for life insurance quotes to cover working spouses, but never think to buy a policy for a non-working spouse. While it might seem easier to make a quantifiable assessment of a working spouse’s net worth, the death of a non-working spouse can have an equally financially devastating impact. A non-working spouse often makes it possible for the other spouse to be the breadwinner. Instead of hiring a nanny, a non-working spouse can stay home and take care of the children.
Additionally, a non-working spouse might handle household chores such as cleaning, laundry, or shopping that might otherwise be outsourced to another service or minimize the working spouse’s ability to earn money. Also, a non-working spouse might have accrued debt that would be passed on to the surviving spouse. Plus funeral costs alone are enough to increase the importance of purchasing life insurance for any loved one—working or non-working. When calculating how much life insurance to buy, a good estimate is between 50-80% of a working spouse’s income multiplied by the number of years left until the children are out of college—though it might be more depending on if you have dependent parent.
So while you might not want to compare life insurance quotes while sipping Mai Tais on your honeymoon, it’s fair to say that purchasing life insurance when you get married—or making sure your beneficiary is updated—could be one of the most important things you do once you’re back from your romantic paradise.
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