Newlyweds have much to discuss when it comes to money management, including bills, budgets and long-term savings goals, but all too often an important component of their financial safety blanket gets overlooked – insurance.
Indeed, a careful look at workplace health, disability, life, auto and homeowners insurance in the weeks immediately following your walk down the aisle can help to maximize your coverage, protect your spouse and preserve financial stability in your home. It may even save you some extra cash to help pay off that honeymoon. (Calculator: Setting financial goals )
“There is no silver bullet; it is just a matter of comparing costs and coverages available to determine which is most advantageous to you,” said Patrick Meyer, a Certified Financial Planner® and director of wealth management client services at Unified Trust Company in Lexington, Kentucky, in an interview. “Younger couples might need counseling from an outside professional, trusted source, or family member.”
In sickness and in health: Benefits
Health insurance benefits are an obvious starting point.
If one spouse has employer-provided benefits and the other does not, it is generally cost effective to add the person without workplace benefits to that plan.
If both spouses have coverage available through their jobs, however, a little research is in order.
First, each partner should discuss the upcoming change with human resource professionals at their respective jobs to learn how coupling health insurance impacts each policy.
You may need to wait for an open enrollment window to add your spouse or leave your plan.
Some companies now charge more to cover family members who have access to their own employer-sponsored plan, and, according to the Insurance Information Institute in New York City, some may not cover spouses who have their own workplace plans at all.1
If you can add each other to your health insurance plans, compare not just the premiums and out-of-pocket costs (copays and deductibles) available through both employers, but the coverage provided as well, said Meyer.
One plan may consume more of your monthly paycheck, but offer fewer network restrictions on the doctors you can see. Other considerations include:
· Does either plan cover visits to your current primary care physicians?
· Do they both have affordable copays for an important prescription?
· Does the plan with higher costs offer more perks that justify its value?
To determine which insurance plan is the better value for your new family, you will need to evaluate your current and projected health care needs.
Lessons in life insurance
Life insurance may be an important part of financial planning, but it is an easy topic to avoid.
A 2020 LIMRA survey found only 54 percent of Americans own life insurance despite the fact that 70 percent of respondents believe it is the right thing to do.1
Life insurance is designed to help protect your loved ones financially in the event you die or become incapacitated.
Coverage options, however, can be complicated.
To determine which type of life insurance policy suits your needs, you will need to educate yourself on the types of plans available.
Whole life policies, for example, provide a guaranteed death benefit for your beneficiaries after you die, but also accrue cash value that can be used during your lifetime to finance large investments such as college for your children or medical expenses during retirement. (Be aware, though, that tapping into the cash value of a life insurance policy reduces its value and death benefit and increases the chance the policy will lapse.). ( Calculator: How much life insurance do I need? )
Term life insurance, on the other hand, provides a death benefit only if you should die within a specified period of time. It has no cash value and it provides no payout if you live beyond the designated term.
As a result, term insurance policies are less expensive than whole life policies.
“When a couple gets married they really need to start thinking about living for two and not just one,” said Meyer. “Now there may be a need to provide some sort of life insurance benefit for the surviving spouse, and any children that come into the equation.”
Disability income insurance, which is designed to help replace lost income if you are no longer able to work due to injury or illness, is another important consideration, he said, noting a long-term disability is statistically far more likely than premature death.
Many employers offer life and disability insurance at a discounted rate, but it may not be enough depending on your coverage needs. (Calculator: How would a disability affect my finances?)
A financial professional can help you assess your life insurance needs.
Couples who say “I do” later in life and those who were previously married often bring separate assets to the marriage, including real estate.
As you merge your households, review your homeowner’s insurance coverage and complete a thorough inventory of personal possessions, said Meyer.
“This is a good time to reevaluate special riders and coverages for valuables like an engagement ring, art work and collectibles,” he said.
You could also lower your collective car insurance premium by changing your marital status and signing up for a joint plan.
According to the Department of Motor Vehicles, married drivers are safer on the road than singles, and often pay lower premiums. 3
Married men, in particular, could see their auto insurance rate fall.
“Males between the ages of 18 and 25 will almost certainly see their rates go down after they get married,” said Michael Barry, a spokesman for the Insurance Information Institute, in an interview, noting older men may see their rate drop by a lesser amount. “There is actuarial evidence that young men are less likely to file claims if they are married.”
Statistically, men are more likely to get into accidents, have more driving-under-the-influence of alcohol accidents (DUIs) and fewer serious accidents than women.4
Combining policies post-marriage, however, does not automatically result in savings.
The Department of Motor Vehicles notes the driving records of both you and your spouse will be factored into your new premium. Thus, if your spouse has multiple tickets or accidents on his record, your rates may actually rise.
It may also make sense to maintain separate policies if your spouse drives a car that is pricier to insure (like a classic car) or travels many more miles per day or month than you.
As you blend your household finances, do not forget to consider the impact your marital status may have on your health, home, auto and life insurance policies.
With a little research and careful planning, you should be able to consolidate your coverage cost effectively and protect who matters most.
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This article was first published in July 2018. It has been updated.
1 Insurance Information Institute, “Married,” 2016.
2 LIMRA, “2020 Insurance Barometer Study,” 2020.
3 Department of Motor Vehicles, “How Marital Status Affects Auto Insurance Rates,” 2016.
4 Insurance Information Institute, “What Determines the Price of My Auto Insurance Policy,” 2016.