Life Insurance Policies on a Spouse
Taking out a life insurance policy on your spouse is necessary when you depend on your spouse for financial support. If your spouse dies, you could be left financially ruined. Figuring out how much you need to buy and what type of policy you should get can be difficult. Doing nothing, however, could turn out to be disastrous.
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Types
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There are two types of life insurance you may buy on your spouse. Term life insurance provides basic death benefit protection. This type of policy offers high death benefits relative to premium payments. The death benefit is guaranteed for the entire time you have the policy in force. Policies may be purchased for terms of one year and up to 30 years. Permanent life insurance, on the other hand, lasts for your entire life. Examples of permanent insurance include whole life, variable life and universal life insurance. The policy builds a cash reserve in addition to the death benefit, which may be used as a savings during your lifetime for any reason.
Function
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You should buy enough life insurance on your spouse to replace her income if she predeceases you. You should also calculate any debts she has and make sure these debts may be paid off or serviced with the money you collect from the policy's death benefit.
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Benefit
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The death benefit you receive when your spouse dies is income-tax-free and paid directly to you. Aside from this benefit, life insurance companies recognize that you have an insurable interest in the life of your spouse. This means that you would suffer a personal and economic loss if she died. Life insurers allow the purchase of significant life insurance to cover any shared debts and to replace the income of your spouse. Insurers also take into account that you may require additional money to pay for daycare or other child services that your spouse may have helped you with.
Consideration
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Consider purchasing both term life and permanent insurance. Term life insurance protects you during your working years. Permanent insurance gives you money to pay for funeral costs and burial of your spouse if you both live to an advanced age. States often prevent the purchase of term life insurance beyond the age of 80 or 85. If your spouse lives beyond this age, your only option to pay for funeral expenses with life insurance is through a permanent policy.
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