Life Insurance Spousal Rider

by Jeff Rose on August 25, 2016 · 0 comments

life insurance spousal riderA once common feature of buying a term life policy was being able to offer what’s called a spousal rider.

A rider is something that you are able to add on to your life insurance policy that can provide additional benefits or coverage depending on what the rider covers. With a spouse rider, you and your spouse will both have coverage under the same policy. These riders basically cover both of you instead of having to purchase two different policies.

For example, there are accidental death riders that will pay out a larger portion than the face amount.

There are child riders that will pay out if something were to happen to your child to help cover funeral costs, but children riders are a little different because they don’t require as much life insurance coverage.

Spousal riders are similar to child riders in that the insured, say for example the husband, would receive some type of economic benefit if his spouse were to die before him.

Spousal riders are more commonly added on to help out with burial costs. The average funeral can costs around $10,000, which can be difficult for a grieving spouse to pay for due to the loss of income.

Do Spousal Riders On Insurance Polices Still Exist?

As time has gone on, spousal riders have become less and less prominent as insurance companies have pushed more for the spouse to take out their own policy. Recently,  I had a 59-year-old male who is looking to lock in a $100,000 15-year policy. His previous policy was expiring and it had a $10,000 spousal rider that he was hoping to replace.

Upon doing further research, I found that there are some life insurance companies that do offer the spousal rider. I was then surprised to learn that there were only a few options available.

The few companies that I found that offer a spousal rider were United of Omaha, Nationwide and Lincoln Benefit Life. The important thing for the client’s case is that none of them offered the coverage he was seeking. For example:

  • United of Omaha offers a spousal rider, but the minimum coverage for the spouse is $100,000.
  • Nationwide requires a minimum face amount of $125,000 for the insured and then the minimal spousal coverage of $25,000 for the spouse.
  • Lincoln Benefit Life is similar to United of Omaha but it only required $50,000 of spousal coverage.

Upon running a few more quotes, I found out for this gentleman’s case the Lincoln Benefit Life was the cheapest option at $140.88 per month.

Spousal Rider Vs. Individual Life Policy

Thinking that the spousal rider option was too expensive, I then ran some quotes for an individual policy for the husband and a final expense policy for his wife.  The cost of a 15-year, $100,000 basic term policy of $48.56 per month plus a $10,000 final expense policy for his wife, which was $57.27 per month, a total premium for both is only $106.03, about $34 difference than doing the life insurance policy with the spousal rider.

Purchasing the term policy with a spousal rider didn’t make much sense here compared to buying the two separate policies.

Are Spousal Riders Worth It?

If you are looking to have a spousal rider, as long as your spouse is in good health, I would consider doing the separate term policy. Do keep in mind that your spouse’s risk class and age will also have an impact on how much your premium policy will end up costing.  Just like a buying another life insurance policy, the company is going to require your spouse to take a medical exam, which can drastically impact how much you pay for the rider.

The biggest disadvantage to a spousal rider is losing coverage. If the primary insured party dies, the rider will no longer be effective. At this point, the spouse would have to find more coverage, and more than likely it’s going to cost them more than it would if they would have originally bought a term policy. Similarly, if the marriage is ended through divorce, the rider won’t cover the spouse and they will be back to square one.

Buying a separate policy will give both spouses coverage regardless if one dies, and because the policy is under each spouse’s name, if there ever were a divorce, both would keep their life insurance coverage. There could be some situations that spousal riders are worth the money instead of buying a separate term policy for your spouse, but these situations are few and far between. In most cases, the rider won’t save you much (if any) money on monthly premiums. Most applicants are surprised to see just how affordable a life insurance policy can be for their spouse.

Because these riders are becoming less common, you’ll have a lot less options, while you would have hundreds of different options for a term life insurance policy. The more options that you have available, the higher chance that you have of finding coverage for a better price.

In just about every case, buying a separate policy is more effective than adding a rider to your policy. Sure, only having one policy with one bill to pay is easier, but it might not be giving you the coverage you want at the best rates.  Regardless of which option you take, we would be happy to find the best coverage at affordable rates for you and your spouse.

How much coverage you and your spouse need?

Regardless if you choose to purchase a rider or a separate policy, it’s important that you have enough coverage for you and your family. If you’re looking at purchasing an additional policy or rider, or it’s been a long time since you’ve looked at your insurance policy, it’s time to recalculate your needs to make sure you’re covered if tragedy ever strikes.

Both you and your spouse should sit down and discuss all of the debts that both of you would leave behind if either were to pass away. Add up your mortgage, car payments, credit card bills, student loans, etc. and the total of your debt is a great starting point to make sure you have enough life insurance.

The other factor that you both should consider is how many people rely on your incomes and how much income would be lost if one of you were to pass away. Do both of you work? Would one spouse be able to live off of just a single income? Do you have children that need your income? All of these factors are going to impact the amount of life insurance you need.

Every year there are spouses suffering through the grief of losing their spouse, and they find themselves dealing with massive bills that they don’t have the money to pay the bills.  Don’t let your spouse become one of these stories. Life insurance gives them the funds they need to get through the difficult time without adding financial struggles.

If you want to get the lowest life insurance rates for the best coverage, you could spend hours on the phone or researching different companies looking for the perfect policy. We can save you hours of frustrating on the phone answering the same questions. Fill out the quote form on the side and the lowest rates from the highest-rated companies will come to you.

 

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