Spouse Term Life Insurance: Human Resources - Northwestern University (2024)

FAQs

Should both husband and wife get term life insurance? ›

It also ensures that your partner will receive the death benefit directly, usually tax-free and without going through probate. If you're in a long-term relationship and share financial obligations, getting life insurance for each other can be a helpful step in protecting your financial future.

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.

Most life insurance policies will pay out the death benefit to the named beneficiaries after the policyholder dies. However, in community property states, the policyholder's spouse is automatically considered the beneficiary.

Voluntary life insurance is a great benefit, and if it is available, you should take advantage of it. However, depending on your family's long-term goals, you will likely also want to consider a personal policy. A personal policy will offer more options and higher coverage amounts to ensure your family's future.

How much life insurance should a married couple have? As a rule of thumb, each spouse can qualify for up to 30 times the person's annual income as a baseline of coverage. Based on other needs such as businesses or loans, mortgages or education expenses, additional coverage may be available.

Spouse Term Life Insurance provides the opportunity for individuals to purchase term life insurance protection for his or her spouse or partner.

Whether life insurance is considered a marital asset depends on the type of policy. A term life insurance policy isn't considered an asset, but a whole life insurance or universal life insurance policy's cash value can be considered an asset. That's because a cash value has worth while the policyholder is alive.

If one spouse purchases term life insurance coverage, the other spouse is generally the beneficiary unless another is specified. If there is a beneficiary other than the spouse, the spouse cannot override it. However, they are usually entitled to half the death benefit because the law splits community property in half.

Typically, you can't keep life insurance on your ex-spouse. This is because many states believe that you don't have an insurable interest in your ex anymore. But if there is an insurable interest because your ex must pay alimony, for example, you might be able to keep the policy.

In many cases, it takes anywhere from 14 to 60 days for beneficiaries to receive a life insurance payout. But many factors impact this time frame. These include the insurance company's procedures, when the claim is filed, how long the policy was active, the cause of death, and state laws regarding insurance payouts.

Do you have to pay taxes on spouse's life insurance? ›

Generally, life insurance proceeds you receive as a beneficiary due to the death of the insured person, aren't includable in gross income and you don't have to report them. However, any interest you receive is taxable and you should report it as interest received. See Topic 403 for more information about interest.

However, you can't buy a plan for anyone without an insurable interest and consent from the person you are buying life insurance for. Insurable interest is present when you can prove to an insurance provider that it would be financially harmful to you if the person you aim to take a policy out for passes away.

What Is Voluntary Dependent Life Insurance? This employee benefit can cover a spouse, children, and any other eligible dependents, depending upon the rules laid out in the plan. In the event that a dependent dies, the employee would receive the death benefit.

You can cash out a life insurance policy. How much money you get for it will depend on the amount of cash value held in it. If you have, say $10,000 of accumulated cash value, you would be entitled to withdraw up to all of that amount (less any surrender fees).

Taking out separate policies allows you to select different amounts of cover. Whereas with a joint policy, both policyholders would receive the same level of cover. If your family has 2 breadwinners, you'll probably want to consider insuring both of you.

Life insurance for both spouses can support the surviving partner and future children. If one or both of you have significant credit card bills, a mortgage, car payments, or student loans, it may be a good idea to purchase enough life insurance to pay off those debts.

If you're in a couple, and especially if you have children, you should both have cover to protect your family. Your choice is between each having your own, separate policies, or having a joint policy that covers you both.

It's almost always cheaper to combine your coverage than to keep separate policies, especially if you already have children. For self-employed spouses, it's typically cheaper to join the policy of a spouse covered by an employer's group policy.