Employer-Provided Spouse Life Insurance: What You Need To Know

Spouse life insurance is a policy that provides financial protection for a spouse or partner in the event of the policyholder's death. It is typically purchased by one partner to cover the other and can be bought through an employer as a voluntary or supplemental benefit, directly from a life insurance company, or through an insurance broker or agent. The policy ensures that the surviving spouse or beneficiaries are not burdened by financial strain and can help replace lost income, cover debts, and fund future expenses such as children's education or retirement. Spouse life insurance can be structured as term life insurance, providing coverage for a specific period, or as permanent life insurance, offering lifelong protection. It is important to note that the insured spouse's consent is required to purchase this type of insurance, and they may also need to undergo a medical examination as part of the application process.

Group life insurance through an employer

Group life insurance is a common employee benefit that provides a death benefit to the insured's beneficiaries if they die while part of the organization. It is offered by an employer or another large-scale entity, such as an association or labor organization, to its workers or members. Group life insurance is fairly inexpensive and may even be free for certain employees, and it is quite common nationwide.

Group life insurance is a single contract for life insurance coverage that extends to a group of people. Companies can secure costs for each individual employee that are much lower than if they were to purchase an individual policy by purchasing group life insurance policy coverage through an insurance provider on a wholesale basis for their members.

Those receiving group life insurance coverage may not have to pay anything out of pocket for policy benefits. People who choose to take more advanced coverage alongside it may elect to have their portion of the premium payment deducted from their paycheck. Just as with regular insurance policies, insured parties are required to list one or more beneficiaries before the policy comes into effect. Beneficiaries can be changed at any point during the coverage period.

The typical group policy is for term life insurance, often renewable each year with a company's open-enrollment process. This is in contrast to whole life insurance, which provides coverage no matter when you die. Whole life insurance policies are permanent, have higher premiums and death benefits, and constitute the most popular type of life insurance.

With group life insurance, the employer or organization purchasing the policy for its staff or members retains the master contract. Employees who elect coverage through the group policy usually receive a certificate of coverage, which is needed to provide to a subsequent insurance company in the event that an individual leaves the company or organization and terminates their coverage.

Group term life insurance covers not just you but your co-workers. You're covered by the policy for as long as you're employed by the company. These policies aren't necessarily the same from one company to the next, however. Employers can determine the size of their death benefit, whether to allow employees to increase their death benefit, and whether to make coverage available for spouses and children.

The first $50,000 of group term life insurance coverage is tax-free to the employee. Employers can provide employees with up to $50,000 of tax-free group term life insurance coverage. According to the Internal Revenue Service (IRS) Code Section 79, the cost of any coverage over $50,000 that is paid for by an employer must be recognized as a taxable benefit and reported on the employee's W-2 form as income.

Group life insurance is a good benefit to have, but there are some limitations to keep in mind. Because group coverage is linked to employment, if you change jobs, stop working for a period of time, leave to open a business, or retire, then the coverage will stop. This puts you at risk of being uninsured or, if you have health issues, having difficulty finding new coverage. You may have the option of converting to a permanent policy, but that can be costly.

Spouse rider

A spouse rider is an optional add-on to a life insurance policy that provides a death benefit if your spouse passes away while the rider is active. It is purchased by one partner to cover the other and is usually added to an existing life insurance policy. The spouse rider's beneficiary is typically the policyowner and provides a smaller death benefit than if your spouse had their own life insurance policy. This type of rider is ideal if your spouse is older or has health issues that make it expensive for them to qualify for their own policy. It is also a more affordable option than a separate policy, although the coverage amount is lower.

A spouse rider can be a good option if you want to ensure your family's financial stability in the event of your spouse's death. It can help cover funeral and burial expenses, as well as ongoing expenses and future needs such as children's education or retirement. The cost of a spouse rider will depend on the insurance company and the specific policy, but it will likely be more expensive than adding a child rider due to the higher coverage options available.

It is important to note that a spouse rider typically ends with the policy term, so spousal life insurance coverage will only be in effect while the policy is active. Additionally, if the policyholder dies or the marriage ends in divorce, the spouse will lose coverage. Therefore, it is crucial to carefully review the terms and conditions of the rider before purchasing it.

When considering a spouse rider, it is recommended to shop around and compare different insurance companies and policies to find the best option that fits your unique needs and budget. You may also want to consult a financial advisor to ensure that the rider aligns with your family's financial planning goals.

Open marketplace

In the US, there are online marketplaces where you can shop for health insurance and compare prices and plans. These include the Health Insurance Marketplace, which is run by the US government, and state-specific marketplaces, such as Virginia's Insurance Marketplace.

These online marketplaces allow you to compare plans and prices, and to sign up for the one that best suits your needs. They also offer help and support, including free, unbiased assistance with the application and enrollment process.

The Affordable Care Act (ACA) gives more people access to health insurance, and you can use the ACA's Health Insurance Marketplace to find more affordable health insurance options. There is no income limit to be eligible to enroll in health coverage through the Marketplace, but you must live in the US, be a US citizen or national, or be lawfully present.

The Health Insurance Marketplace also offers dental and vision coverage, in addition to medical care.

Open enrollment periods allow you to choose a new plan or make changes to your existing plan. You may also be able to change your coverage during a special enrollment period if you experience a significant life event, such as moving or having a baby.

Separate individual life insurance policies

Some couples prefer to have separate policies because they are unwilling to accept the limitations that usually come with purchasing life insurance through a spousal rider. For example, there may be restrictions on the amount of coverage that can be purchased for a spouse, and the additional insured must typically be married to the primary insured.

Additionally, separate policies allow couples to mix cash value policies with term policies to reduce their total cost of life insurance while building cash value that earns interest. This can be a strategic financial decision, particularly if the couple has children or is planning for retirement.

Furthermore, separate individual life insurance policies offer more flexibility than joint policies, which are generally less flexible and don't offer the same level of customization. With separate policies, each spouse can choose the type of policy, the duration of coverage, and the amount of coverage that best suits their needs.

However, it's important to consider the potential costs and administrative burden of managing separate policies. There may also be additional underwriting and medical exam requirements for each individual policy, which can increase the overall complexity and expense.

In summary, separate individual life insurance policies offer several benefits, including customization, flexibility, and the ability to build cash value. However, they also come with added costs and administrative responsibilities. Couples should carefully consider their unique circumstances and financial goals when deciding between separate individual policies and other options, such as joint life insurance policies or spousal riders.

Joint life insurance policies

There are two types of joint life insurance: first-to-die and second-to-die. First-to-die policies pay out after the first spouse dies, providing financial support to the surviving spouse. Second-to-die policies, also known as survivorship life insurance, pay out the death benefit after both spouses pass away, with the money going to their beneficiaries.

First-to-die policies are meant to support the surviving spouse by helping them replace lost income, care for children, or cover debts. Since joint life insurance only pays out once, the survivor would need to purchase a new policy if they want continued coverage.

Second-to-die policies are typically used for estate planning and can be beneficial for individuals who want to transfer wealth to their children or grandchildren with potential tax benefits. It is a good option for couples who have enough money that the surviving spouse won't need the death benefit from a traditional life insurance policy.

Frequently asked questions