Time to assess the insurance coverage for your new and growing household.
Insurance When You're Newly Married
Marriage changes everything, including insurance needs. Newly married couples should consider a comprehensive review of their current, individual insurance coverage to determine if any changes are in order as well as consider new insurance coverage appropriate to their new life stage.
- Auto. The good news is that married drivers may be eligible for lower rates than single drivers. Since most couples come into their marriage with two separate auto policies, you should review your existing policies and contact your respective insurance companies to obtain competitive quotes on a new, combined policy.
- Home. Newly married couples may start out as renters, but they often look to own a home or condo as a first step in building a life together. The purchase of homeowners insurance or condo insurance is required by the lender. While these policies have important differences, they do share the same purpose – to protect your home, your personal property, and your assets against any personal liability.
You should take special care of what is covered under the policy, the types of covered perils, and the limits on the amount of covered losses. Pay particular attention to whether the policy insures for replacement costs (preferable) or actual cash value.
- Health. Like auto insurance, couples often bring together two separate, individual health insurance plans. Newly married couples should review their health insurance plans’ costs and benefits and determine whether placing one spouse under the other spouse’s plan makes sense.
- Disability. Married couples typically combine their financial resources and live accordingly. This means that your mortgage or car loan may be tied to the combined earnings of you and your spouse. The loss of one income, even for a short period of time, may make it difficult to continue making payments designed for two incomes. Disability insurance replaces lost income, so that you can continue to meet your living expenses.1
- Life. Central to any marriage is a concern for each other’s future well-being. In the event of a spouse’s death, a lifestyle based on two incomes may mean that the debt and cash flow obligations can’t be met by the surviving spouse’s single income. Saddling the surviving spouse with a financial burden can be avoided through the purchase of life insurance in an amount that pays off debts and/or replaces the deceased spouse’s income.2
- Liability. Personal liability risks can have a significant impact on the wealth you are beginning to build for your future together. Consider purchasing umbrella insurance under your homeowners policy to protect against the financial risk of personal liability.
- Extended Care. Extended care insurance may be a low priority given other financial demands, such as saving for retirement. Nevertheless, you may want to have a conversation with your parents about how long-term care insurance may protect their financial security in retirement.
Insurance Needs when Married with Children
A growing family, by definition, means growing financial obligations – both in the present and in the future. Raising children can increase your insurance needs and heightens the urgency for being properly prepared.
- Auto. When a child becomes a new driver, one option is to add the teenager to the parents' policy. You may want to discuss with your auto insurer ways to reduce the additional premium that accompanies a new driver.2
- Home. You should periodically review your homeowners policy for three primary reasons.
A growing family generally accumulates increasing amounts of personal belongings. Think of each child's toys, clothes, electronic equipment, etc. Moreover, household income tends to rise during this time, which means that jewelry, art, and other valuables may be among your growing personal assets.
The second reason is that the costs of rebuilding – and debris removal – may have risen over time, necessitating an increase in insurance coverage.
Lastly, with growing wealth, you may want to raise liability coverage, or if you do not have an umbrella policy, consider adding it now. Umbrella insurance is designed to help protect against the financial risk of personal liability.
Health. With your first child, be sure to change your health care coverage to a family plan. If you and your spouse have retained separate plans, you may want to evaluate which plan has a better cost-benefit profile. Think about whether now is the appropriate time to consolidate coverage into one plan.
- Disability. If your family is likely to suffer economically because of the loss of one spouse's income, then disability insurance serves an important role in replacing income that may allow you to meet living expenses without depleting savings. Remember, however, the information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult a professional with legal or tax experience for specific information regarding your individual situation.
If you already have disability insurance, consider increasing the income replacement benefit since your income and standard of living may now be higher than when you bought the policy.
- Life. With children, the amount of future financial obligations increases. The cost of raising children and funding their college education can be expensive. Should one of the spouses die, the loss of income might severely limit the future quality of life for your surviving children and spouse. Not only does death eliminate the future income of one spouse permanently, but the future earning power of the surviving spouse might be diminished as single parenthood may necessitate fewer working hours and turning down promotions.
The amount of life insurance coverage needed to fund this potential financial loss is predicated on, among other factors, lifestyle, debts, ages and number of children, and anticipated future college expenses.
Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
Some couples decide to have one parent stay at home to care for the children full time. The economic value of the stay-at-home parent is frequently overlooked. Should the stay-at-home parent die, the surviving parent would likely need to pay for a range of household and childcare services, and potentially, suffer the loss of future income due to the demands of single parenthood.
- Extended Care. The earlier you consider extended care choices, the better. However, the financial demands of more immediate priorities, like saving for your children's college education or your retirement, will take precedence if resources are limited.
Ronald Donato Jr. CFP®, MBA may be reached at 856.667.6228 or Rdonato@asfinancialservices.com.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1 - cars.usnews.com/cars-trucks/car-insurance/average-cost-of-car-insurance [4/12/19]
2 - chicagotribune.com/business/success/terrysavage/tca-disability-insurance-can-protect-you-from-unthinkable-20190410-story.html [4/10/19]