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The family that buys life insurance together, stays together, right? That’s not your typical cliche, but a lot of people believe it.
If you’re buying life insurance for yourself, they think, why not try to get it for everyone? But is it possible to buy life insurance for your entire family, partner and children included? And is it advisable? And can you buy it all from the same insurance company? There are several ways to protect your whole family with life insurance, and we can walk you through your options:
For many people thinking about life insurance, the first step is to purchase a policy that will cover yourself — or more accurately, provide a death benefit for your family — in case you die. This is easiest and most straightforward type of life insurance to purchase, because it just requires you applying and doesn’t involve your spouse. You can choose between term insurance and permanent insurance, though term insurance is the right choice for 80% to 90% of people.
We can help you start the process right now by easily getting and comparing free life insurance quotes.
Once you have life insurance for yourself, the next logical question is, should you buy life insurance coverage for your partner as well? For many people, the answer is yes. Even if your partner stays at home and doesn’t bring in an income, they likely perform important work would that you would have to pay someone else to do in the event of their death (think: childcare). But what is the best way to cover your partner? There are two options: separate and joint policies.
Joint life insurance policies are policies that cover both people in a marriage. These are typically permanent universal life insurance policies, meaning they are hybrid products that combine insurance with some type of savings or investment component, called the “cash value,” though joint term policies also exist.
There are two kinds of joint policies: first-to-die life insurance, which pays the death benefit after the first spouse dies, and second-to-die life insurance, which pays the death benefit after the second spouse dies (these are most useful to pay estate taxes or for inheritance planning).
Joint policies, especially second-to-die policies, can be cheaper overall if one of the spouses is in poor health, but because most joint policies are permanent life insurance, the premiums are generally more expensive than term policies. It’s also important to note that both spouses still have to go through underwriting and take a medical exam to buy joint life policies.
Separate life insurance policies are just what they sound like: you and your spouse each get your own separate policies and each pay your own separate life insurance premiums. Separate policies are a better idea for most people, but it’s worth talking to an insurance agent about both options. For example, if one spouse has a pre-existing medical condition or is in ill health, a separate policy for that spouse may be too expensive or even impossible, but a joint policy could be an option.
While most people don’t buy life insurance for their kids — and don’t need to — there can be legitimate reasons to buy children’s life insurance. For example, a small lump sum death benefit in case of a child’s death can help parents pay for funeral expenses and can help them take time off work to grieve. While no kid needs a million dollar life insurance policy, a small death benefit of a few thousand dollars can make a huge difference.
There are two major ways to buy life insurance for children. You can either buy a specialized child life insurance policy or you can purchase a child rider for your term life insurance policy.
Child life insurance policies are basically whole life insurance policies with a different marketing spin. Whole life policies, a type of permanent life insurance, are both life insurance policies and a savings vehicle. Many salespeople convince parents to buy child life insurance policies with the idea that it will help their child pay for college, or otherwise build a nest egg for their child once they become a young adult. But child life insurance is not a good investment or savings vehicle, especially if you want to save for college.
There is, however, one exception to the rule. If your child is highly likely to develop a medical condition that would make buying life insurance later in life more difficult, then you should consider buying a child life insurance policy for them now. This protects their insurability for the future.
Child riders on your term life insurance policy make a lot more sense. Child riders are additions parents can add to their own policy and are relatively cheap — often only $5 per year for every $1,000 of coverage. That puts the cost of $10,000 of coverage at about $4.17 per month. On top of that, a single child rider will usually cover all of the children in your household. Child life insurance policies, on the other hand, operate on a per-child basis. This makes child riders significantly less expensive than child life insurance.
Learn more about buying life insurance for children.
There may be another branch of the family you’re thinking about covering: your parents. And you may have very legitimate reasons for wanting to buy life insurance coverage for then, especially if they have cosigned loans with you, are helping you with tuition or other payments, or provide childcare.
But can you buy life insurance policies for your parents? The short answer is no, you can’t. (For the long answer, read more about buying life insurance for your parents.) In order to buy a life insurance policy on someone else, you have to be able to prove insurable interest, and that’s simply very difficult for adult children to prove. What you can do, however, is ask your parents to apply for their own policies and you could pay the premiums for them. They can own the policy and name you as a beneficiary.
With a term life insurance policy for every adult in the house and a single child rider for all of the children, the entire family is covered. Term life insurance can protect your family from the costs of unexpected death — funeral costs, an unfinished mortgage, unpaid student loan debt, lost income, future college savings — and a child rider can help parents take time to grieve without worrying about money. Taken together, these two tools help protect the whole family in the event that one of their family members passes away prematurely.
This article originally appeared on Policygenius.
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