Founding Father Benjamin Franklin said, “in this world, nothing is certain except death and taxes.”
You’ve likely been taking care of the latter for years, but as to the former, death can be an unpleasant subject. As a newlywed, though, it’s important to prepare and plan ahead so that if something happens to one of you, the other would be cared for financially. Purchasing a life insurance policy as soon as possible can help address that (and insurance is usually less expensive the younger you are when you get it).
When do you need life insurance? If either of you were to die, would it leave the surviving spouse with a financial hardship? If so, you should consider life insurance as soon as possible. Even a small amount of coverage can help a grieving spouse.
Since we didn’t marry for money, isn’t it morbid to worry about life insurance right away? No, and here’s why: you have an insurable interest when damage or loss of something or someone would cause financial loss. That could include the income that spouse earns that helps fund the household, or the childcare that spouse provides that would need to be replaced, or any other ways in which a spouse contributes to the joint budget. Taking out a life insurance policy for both spouses right now ensures that the surviving spouse can still afford to continue living life when the other passes away. Life insurance is actually a significant act of love, and as part of an overall financial plan it’s just another aspect to include in your financial housekeeping.
How much life insurance coverage do you need? It depends on your joint household budget, expenses, and any additional financial obligations you may have as a couple. For a married couple, the policy amounts might be different for each person. For example, if one spouse is the primary earner, that person’s policy amount should provide a larger
payout, since it would take more money to replace their income if they were to pass. There are three common ways to calculate life insurance needs. The multiple-of-income approach is like the example mentioned above (attempting to replace the primary breadwinner’s income for a set number of years). The human life value approach uses factors like age, gender, occupation and earnings to establish a number, and capital needs analysis not only replaces someone’s salary, but also includes other monetary needs of the living spouse. Just remember, the cost of the insurance is based on a number of factors, including how much money you want the policy to pay out. That’s why it’s important that we consider insurance as part of your overall financial plan, so you can be sure you’re getting the best value and type of policy for your long-term goals.
As a new couple you have a lot of changes to consider. Adding life insurance to your to-do list might not seem as important as other items, but it’s a cornerstone in your financial foundation as you begin to build your lives together. It may seem like a complex topic, but we can help you work through it. Give us a call to get started.