Buying life insurance is a big decision. Not only must you decide how much coverage you want and who to name as beneficiaries, but you must choose your supplements too.
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Most people know about supplemental life and AD&D (Accident, Death, and Dismemberment Insurance) but forget about supplement life insurance for a spouse or child.
Supplemental policies for the others in your life may be just as important. What would happen if your loved one died? Would you suffer financially?
You might and not even realize it. Here’s what you must know.
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What is Supplemental Spouse Life Insurance?
Supplemental spouse life insurance covers your spouse should he/she die. Are you wondering why I would need spousal life insurance when my spouse doesn’t work?
Think about it.
Just because your spouse doesn’t bring in income doesn’t mean he/she doesn’t provide value. If you have children, does your spouse take care of them? Does your spouse take care of the house?
If your spouse were to die, what services or assistance would you need to cover? These cost money. For example, if you need a daycare provider for the kids or a housekeeper for the house, the life insurance proceeds could cover those costs, along with the cost of your loved one’s final arrangements.
If you don’t want to buy another policy to insure your spouse, you can add him/her to your life insurance with supplemental life insurance for your spouse or domestic partner. This is most common through your employer – they provide you with a term life insurance policy with the option to add supplemental coverage for your spouse or domestic partner. Some even offer additional child life insurance.
How Does It Work?
If your spouse or child died, the supplemental life insurance you bought would pay you the coverage amount. Since you’re the policyholder, you are also the automatic beneficiary of the supplement.
Just like if you died, your beneficiaries would receive the death benefit; the same is true of supplemental spouse life insurance. Most policies have smaller coverage limits than if you bought a separate policy, but if your spouse doesn’t work and you’re just looking for a supplement to get you through the child-raising years or to cover the cost of getting help around the house, a supplemental policy may suffice.
Like any life insurance, the death benefit only pays out if the policy is paid on time.
Employer-Sponsored vs. Private Voluntary Spouse Life Insurance
Most people have two options when buying voluntary spouse life insurance – employer-sponsored or private.
Employer-sponsored life insurance supplements may cost less since they typically have a group rate, and your employer may pay a portion of the premium, but there are reasons not to get it.
- They aren’t portable. The average employee stays at his/her job for 5 years. If you leave, you lose your life insurance and your supplemental insurance for your spouse. If it’s the only policy you have for him/her, you’re left with nothing.
- The limits are low. Most supplemental policies through an employer are much lower than you could get through a private policy. Employers set the limits based on the premiums they want to pay if they’re covering some or all of the benefits.
- You may have to wait for eligibility. Some employers make you wait a year or so before you’re eligible for life insurance. This could mean you go with no coverage for you or your spouse for a year. Life is too unpredictable to take that chance.
Private insurance has its advantages and disadvantages too. First, the benefits.
- It’s portable. You can secure private life insurance from any insurance agency and keep it for its entirety no matter where you work. This means you don’t have to worry about losing your spouse’s or child’s coverage if you change jobs.
- There are higher limits. Most policies have much higher limits for spouse supplemental coverage than employer plans offer. If you aren’t a high net worth individual, you may want more coverage than your employer allows.
- There’s no wait for eligibility. You can buy a policy and supplement whenever you want and can afford it.
But, like anything, there are downsides to private voluntary spouse life insurance.
- You are responsible for the premiums. You won’t have the employer contributions you may have if you opt for employer-sponsored life insurance and spousal coverage.
- The premiums may be higher. Whether you take a higher coverage amount or not, you’ll likely pay higher premiums because you aren’t getting a group rate.
- You need to qualify. Employer-sponsored life insurance doesn’t require a medical exam or any other qualifying factors. Your private policy may require certain qualifying factors that make it more challenging to get approved.
Should I Get Supplemental Life Insurance for my Spouse or Child?
Securing supplemental life insurance for your spouse and/or child is a good idea. Supplements typically don’t cost as much as a full-blown policy, and they provide just enough coverage to pay the final expenses and get you through the first couple of years.
If you are married, have a domestic partner, and/or child(ren), protecting them is important too, just as you protect yourself with life insurance. Yes, it will increase your monthly premiums, but think of the value if the unexpected happens.
Is Supplemental Life Insurance Worth It?
Like any insurance decision, supplemental life insurance is worth it in many situations, but you must look at your finances. Should something happen to your spouse or child, do you have enough money saved, or would it put you in a financial bind?
If you’d suffer financially if either passed away unexpectedly, protect your family today. For a slightly higher premium, you could have the peace of mind you need to take care of your family financially.
No one likes to think of the unexpected, but life happens, and we must be prepared. Find the best supplemental life insurance policy for your spouse or child(ren) and cover yourself today.