The key purpose of life insurance is to ensure a family is cared for should the person primarily responsible for bringing income into the household suddenly passes away. While the traditional family decades ago featured one breadwinner and one stay-at-home spouse, today’s family model has changed – as has the need for life insurance on both spouses.
Households with One Primary Caregiver
In a home with one primary caregiver, the majority of the life insurance will be purchased for that individual. You’ll use traditional estimators to determine how much the family would need to replace that individual’s income and needs, ranging from daily living expenses and existing debt, to college tuition for the kids.
If the spouse works, but only part-time, you should probably still carry life insurance on that individual. The amount may be smaller and will really depend on what that spouse’s income was and what monthly expenses it covered.
A spouse who doesn’t work at all may still need to carry a small amount of life insurance. This lower level of coverage would ensure the working spouse has income for funeral expenses, to take a leave of absence from work to grieve, and to hire childcare for the children. Childcare alone can cost thousands of dollars per year, especially if you have young children who can’t care for themselves at all yet.
Any household service the non-working spouse performed will need to be replaced if you can’t absorb it on your own. This can extend away from childcare to household chores/cleaning, errands and household tasks, and even financial issues and budgeting. Can you handle those tasks or will you have to hire a house cleaning service or monthly bookkeeper? Your insurance professional can help you estimate a non-working spouse’s contribution in terms of living expenses.
Households with Equal Caregivers
Today’s family model leans more towards there being two working spouses. This means most of the bills, including the mortgage and car payments, are split more evenly than they would have been in previous years. While there is a more significant need to for each spouse to have his own life insurance policy, you’ll still need to work with your insurance agent to determine the amount of life insurance each person needs to purchase.
Marriages are partnerships. While each partner may not have an equal role when it comes to financial contributions, there is still financial value placed on the tasks the person who isn’t working (or working as much) performs. Speak to your insurance professional about completing some estimators and surveys to determine how much life insurance each of you should carry. The amounts may be very different, but they’re equally important.