Understanding life insurance for spouses

To have and to hold, for richer or for poorer: When it comes to long-term partnerships, financial stability is a building block for happiness.

Not only does financial stability provide peace of mind, but recent studies suggest that it's one of the top three most important traits to have in a partner. Just think about how good it makes you feel when you and your spouse are on the same page in everyday life. Imagine that same feeling applied to your partnership with your long-term financial plan.

So although it's not the most exciting topic, discussing life insurance with your spouse is a key component of building a financial foundation.

Why is it important for couples to get life insurance?

Life insurance isn't something most people spend a lot of time thinking about, yet it's a key contributor of feeling financially secure. About two-thirds of respondents in a recent study suggest that owning life insurance has helped them feel financially secure.

So what if you see the need for life insurance protection but your partner doesn't? Consider these reasons why life insurance is a critical part of a solid financial plan, and then apply them to your scenario:

• Life insurance could cover expenses such as funeral and burial costs, pay off debt obligations, replace your income and help you stay on track for large financial goals.
• In the case of a non-working spouse life insurance can alleviate the financial burden of their loss, such as caring for children.
• We have a sense of security when we know that if a spouse dies, our loved ones will be able to maintain their current lifestyle.
• With the right policy in place, we can ensure that our assets are distributed as we desire, and we can provide legacy planning for children and other loved ones.

What is spouse life insurance?

Spouse life insurance is more of a category than a specific type of life insurance. It's just another way of saying that you're getting life insurance for your spouse or partner.

Some life insurance companies may market specific policy types as "spouse life insurance," but ultimately, there are different methods of covering your spouse.

How you can protect your spouse with life insurance

These strategies fall within two basic policy types: term insurance and permanent insurance. Three details matter: 1. Who owns the policy? 2. Who's insured? 3. Who's the beneficiary?

Separate life insurance policies

Buying separate life insurance policies just means each spouse takes out an individual policy. Typically, the owner and insured are the same person, and they name their spouse as the beneficiary.

In the event of one spouse's death, the death benefit is paid out to the surviving spouse.

The advantage of separate life insurance policies is that each spouse has their own coverage and they're able to maintain control of that policy regardless of life circumstance. This is a good option for couples who have different life insurance needs, which is common.

Joint life insurance policy

Joint life insurance policies, also known as survivorship life insurance or second-to-die life insurance, cover two people under one policy. In other words, both spouses own the policy and are insured under the same policy. These are not as common as you might think, due to their lack of flexibility.

The death benefit is only paid out when both spouses have passed away. This type of policy is often used to cover expenses, such as final arrangements, mortgage payments or any outstanding debts.

The cost of a joint life insurance policy varies since the premiums depend on factors like the age and health of both parties.

Group life insurance

It's common for full-time employees to receive employer-sponsored life insurance as part of their benefits package. This involves minimal to no underwriting, and costs can be low.

These packages typically offer options to add coverage on spouses or domestic partners for minimal to no cost. Because these policies are usually limited, they're best used to supplement a privately owned life insurance policy.

Spousal riders

Some private insurance policies offer riders that provide protection for your spouse. These also come with limitations, but some offer a spouse the ability to convert the rider into their own independent policy at some point in the future.

Family Servicemembers Group Life Insurance

Military spouses have the option for coverage under FSGLI, also known as Family Servicemembers Group Life Insurance. Like other group coverage, FSGLI protects the spouse and dependent children of service members covered under SGLI.

FSGLI premiums are based on age bracket and coverage amount. They offer affordable benefits that can play important roles in protecting a military spouse.

Next steps in securing spousal life insurance

Remember, life insurance is there for your financial security. It's important for both partners to understand why this coverage is important and how it can help in the event of a premature death.

Once you're on the same page and are ready to move forward, consider the following next steps.

Assess your needs.

It's likely that, as individuals, your life insurance needs will differ depending on the level of financial support you require. Don't just opt for the same amount. Instead, have a discussion about your goals now and in the future. Think about what would happen if one of you were to predecease the other.

And don't overlook the financial value and importance of a stay-at-home spouse. Just because they don't bring home a W-2, doesn't meant they don't have an impact on your finances and standard of living.

Budget for the cost.

Life insurance is more affordable than most people realize, and there are options to fit most budgets. To make sure you and your partner are on the same page, find out how life insurance can and should fit within your budget.

Make the decision together.

If one spouse drives the life insurance discussion, it will make the decision-making process a lot harder. Take a look at the options together and do some research depending on what both of you think is needed.

Talk through your concerns with a professional.

Once you understand the purpose of life insurance, there's little doubt about its importance. Usually, it's easy for two informed partners to get on the same page.

The challenging part is moving forward with selecting a policy, as the options often feel confusing. If you're overwhelmed by the cost of life insurance or the complexity of the policies, schedule a call with a USAA life insurance professional. They're trained to help you weigh the pros and cons and find a solution that works for your needs and fits within your budget.