What is Dependent Life Insurance?
Dependent life insurance is life insurance added to an existing life insurance policy to cover the policy owner’s dependents, like a spouse or child.
The basics of dependent life insurance
Dependent life insurance allows you to buy a lower amount of coverage for someone who relies on you. It’s most commonly purchased for children and spouses, but some insurers will also extend it to elderly parents and domestic partners.
With dependent life insurance, you don’t buy a standalone policy for the dependent. Instead, you add their coverage to your own life insurance policy. When you add this type of protection to your policy, you get automatically added as the beneficiary. That means that if the dependent dies, their death benefit (the lump sum the insurer will pay out) goes directly to you.
Dependent life insurance comes with a pro in the form of minimal underwriting, but a con in the form of lower coverage.
While dependent life insurance may not require the same intensive underwriting as your own policy did, your insurer will likely still want to collect some information about your dependents. In many cases, you’ll need to fill out a questionnaire about them and their current health status before your insurer will offer to extend coverage to them.
Generally, insurers cap how much coverage you can get through adding dependent life insurance. For children, the maximum is often somewhere around $10,000 or $20,000. The cap is higher for spouses, but the death benefit will generally be significantly smaller than the benefit you get from your own coverage.
All this said, dependent life insurance is typically more affordable and easier to get than buying a standalone policy for your dependent.
Why people buy dependent life insurance
People often buy life insurance as an income replacement. The thinking goes that if you died, your family might not be able to survive without your salary.
But income replacement isn’t the only reason to buy life insurance. For starters, funeral expenses often add up to nearly $10,000. It’s an awful situation to consider, but the last thing you want is to have to decide between giving them the funeral you want and avoiding financial strain.
For non-earning spouses and domestic partners, the need for life insurance grows. While they might not technically earn a salary, you can attribute a value to what they do in the home. Child care alone adds up quickly. Consider cleaning and cooking, too, and it becomes quickly apparent that life without them could get expensive. Dependent life insurance gives you a way to ease that burden as you adapt to an unexpected loss.
Voluntary dependent life insurance
Many insurers offer dependent life insurance as an add-on to standalone insurance policies purchased by individuals. But if you have life insurance coverage through your employer, you may be able to explore getting protection for your dependents’ lives there.
When added to a group life policy, this is called voluntary dependent life insurance.
Voluntary dependent life insurance works essentially the same as dependent life insurance added to a standalone policy, except that the employer may cap how much coverage is available. Also, you’ll pay the associated premiums through a paycheck deduction.
When added to a group life policy, this is called voluntary dependent life insurance.
Voluntary dependent life insurance works essentially the same as dependent life insurance added to a standalone policy, except that the employer may cap how much coverage is available. Also, you’ll pay the associated premiums through a paycheck deduction.