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<>a>p>By Michelle Matlock, Life Quotes, Inc.

You’ve finished opening your wedding gifts and have one blender too many, the caterer has been paid and you’re still recovering from the weeklong honeymoon in the Caribbean, now what? You might want to take a look at your life insurance coverage.

Term life versus whole life

Things change when you gain a spouse, and in some cases, so should your life insurance.

Insurance experts often believe that term life may be the better option for newlyweds who are just starting out. This is primarily because term life can provide a hefty amount of coverage ranging from ,000 to 0,000 at an affordable rate.

Also, if your financial situation changes term life can always be converted to a whole life policy. Whole life can provide a fixed premium (meaning it doesn’t increase every year with age) because it covers you for a lifetime. In addition to this, some whole policies offer a cash value component that you can borrow against in the event you need a loan for a house or would like to save money for retirement.

“Marriage is a good reason to convert a term policy to whole life, but most term life policies have conversion provisions that policyholders should look out for,” explains James Hunt, a life insurance actuary and former Vermont insurance commissioner. “Some can only be converted in the first couple years during the life of the policy and if you don’t convert during that period, you may lose the option.”

Hunt adds that the type of life insurance a married couple should buy all depends on the couple’s income, especially if one spouse stays home and the other one works.

“We would certainly suggest married folks should consider a large death benefit especially if they have lots of draws on their income such as housing and loan debt,” recommends Brian Ashe, a spokesperson for the Life and Health Insurance Foundation for Education. “With term they can get the largest bang for their buck. Later on, they might want to look into getting a considerable amount of whole life insurance or converting their term policy to some form of permanent life insurance as soon as they are financially capable, especially if they plan to start a family.”

Some critics believe you should buy term and invest the difference elsewhere.

“I would be cautious about converting to whole life because it’s coverage for life and more expensive, with term you would pay far less in premium and have the option to continue coverage,” says Hunt. “They should be thinking about the initial cost of whole life coverage and then figure out if that money would be better invested in tax-free retirement accounts such as 401(k) plans and IRAs. There are a lot of options to consider given each individual need.”

Update your current life insurance coverage

Often when you’re married you start to build assets together, life insurance not only pays for funeral expenses in the event of your death in addition to providing a steady stream of income to your surviving spouse, it can also be used for a down payment on a home or help pay for your children’s college tuition.

Hunt says it’s a safe practice to compare your current term life policy against other insurance products on the market.

“Marriage is a particularly good time to check out what you have and compare it against what’s out there,” he says. “There are many products that can be customized to your needs with varying costs.”

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What can happen if you don’t specify beneficiary designations?

If you think divorce is messy, try the legal repercussions that come from disputing a beneficiary on a life insurance policy. A legal battle in court could persist for years and if your dependents need the money to pay for funeral expenses or to provide income to your household, this could leave your loved ones in desperate financial straits.

“If there is any major change in their lives or the lives of their beneficiaries the policyholder needs to reflect those changes in the policy while they’re still alive. If something should happen to the primary beneficiary, they should also make sure they have a contingent beneficiary as a backup to make certain the benefit is set-up correctly with the insurance company so the money goes to the right person or persons,” suggests Eric Matlin, an estate planning lawyer with Matlin & Associates, P.C. in Northbrook, Ill.

“The best way to anticipate many of life’s zigzags is to set-up trusts that anticipate foreseeable contingencies that may result from a life insurance dispute,” says Matlin.

“If there is a tax reason behind setting up a trust, or its part of a divorce settlement, the divorcing couple may be required by the courts to set-up an irrevocable trust where the proceeds would be taken out of the taxable estate of the dead person. Often when there is a divorce, the former spouse doesn’t trust that their ex will keep the life insurance on them in force.”

Matlin adds that if a policyholder sets up a revocable trust, the terms and conditions of the trust can be changed during their lifetime. But once they die, it becomes irrevocable.

“Which means its conditions are rock solid and it can’t be contested,” he says.

“This can also be used to prevent a dispute caused by any ambiguities that may arise in the contract that designates a beneficiary,” he says.

Matlin says one of the more common reasons a policyholder sets up a trust is because they don’t want to give a lump sum of money to a beneficiary who can’t really handle it.

“If an adult beneficiary has a history of being immature with money, the policyholoder can have a separate trustee dole out the money to them under certain terms and conditions,” he explains.

“The policyholder should determine what their goals are for the benefit and talk to a lawyer to put those terms into legalese.”

Following a divorce, there is always a possibility that the policyholder never got around to changing the beneficiary on their life insurance policy, and inadvertently ends up leaving the death benefit to their former spouse.

“One of the worse things that can happen is making the former spouse the beneficiary to their estate. Going through probate isn’t that horrible, but it’s a public process and it opens the door to anybody who wants to disrupt the process such as a long lost relative. If you don’t have your favorite daughter as the contingent beneficiary on the policy, that money could go to the junkee son that you haven’t seen or heard from in 20 years,” says Matlin.

Changing the beneficiary on your policy is doubly important if you marry for a second time. When you purchase life insurance only you as the policyholder can change the beneficiary. Your new spouse should be included on any current life insurance policies you have.

Recent marriage statistics

In 2007, there were 2,197,000 marriages in the United States compared to 2,193,000 marriages from the year before.

The divorce rate in the U.S. dropped from 872,000 in 2006 to 856,000 in 2007.

According to latest statistics (2008) by the U.S. Census Bureau’s Current Population Survey, 46.6 percent of the unmarried population 18 and older is male and 53.4 percent are female.

The U.S. Census Bureau’s American Community Survey in 2005 found that women make up 49.9 percent of the married population, compared to 56.4 percent of the unmarried population.

Married women are more likely to have private insurance, and less likely to have Medicaid, than unmarried women, according to the CDC in 2008.

According to the study “Till Death Do Us Part: Marital Status and U.S. Mortality Trends, 1986-2000,” that appeared in the 2009 December issue of the Journal of Marriage and Family, the widowed and single have a higher mortality risk than their married counterparts.

Make sure you have enough life and disability insurance

If your company offers group life insurance this may have been enough coverage when you were single, but now you have to consider the needs of your spouse and any children you may have in the future.

In addition to this, you should consider disability insurance. Most employers provide short-term or long-term disability insurance.

Short-term disability insurance typically lasts up to two years and would replace any income lost during your recovery.

If you were injured on the job and found that you could not work for a lengthy amount of time (90 days or more), long-term disability insurance can be a safety net in protecting your finances. Benefits usually pay up to 60 percent of your salary over a specified period of time. Some may only pay until age 65 and others may provide the benefit for your entire lifetime, this all depends on the insurance company that issued the policy. A good practice might be to speak with your human resources director to determine the amount of time long-term disability insurance covers.

“I would suggest that the breadwinner looks into long-term disability coverage at work because that would cover their income if they become injured or disabled and can’t work,” says Hunt. “In many cases, this insurance can be one of the more valuable insurance products because there is a higher chance that you will become disabled during your working life.”

You can also purchase individual disability insurance on your own where you pay the premiums, one of the benefits of an individual policy is that the disability benefits are not taxed.

Be sure to update your insurance coverage to include all family members

If your new spouse has children from a previous marriage and you would like to include your spouse on your policy, you need to let your insurance agent know. Oftentimes, when a new spouse is involved, the old spouse may still need the coverage if they have shared custody of minor children. It’s best to review the policy and be certain that none of your loved ones are left out in the cold.

This article originally published at Life Quotes, Inc.

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