There is a serious misconception about not buying life insurance for a stay-at-home spouse that is all too common. Many people feel that because a spouse doesn’t work outside the home, life insurance is not necessary because there’s no salary to replace.
What are you Thinking
The problem with this thinking is that it fails to account for all the jobs a stay-at-home spouse performs during a typical day, one of the most important being childcare. Those tasks would still need to be completed if the stay-at-home spouse died. The surviving spouse would have to quit his or her job, go part-time, or hire someone else to help out. If the stay-at-home spouse had life insurance, the policy proceeds could be used to pay someone to tackle the household tasks and care for the children so that the remaining spouse could continue to work and support the family.
When you buy coverage for a stay-at-home spouse, you need to consider how long you would need help. If your children are infants or toddlers, you’ve got many years of childcare before they can be left alone. If they are teenagers, you will need less help because the children are gone most of the day, and they can also help with household chores.
How Much is enough or too much
Until you do a needs analysis, you can’t know how much coverage the stay-at-home spouse should own. The best way to ensure you know how your family depends on the stay-at-home spouse is to talk with your insurance agent. They can help you determine how much coverage to purchase.
There are two basic types of life policies. Permanent life insurance provides life-long protection as long as premiums are paid when due. This coverage also accumulates tax-deferred cash value. Such cash value can be borrowed against for education, buying a home, and supplementing your retirement income. Remember that any unpaid loans made against the policy’s cash value accrue interest and reduce the policy’s death benefit if the insured dies before the loan is fully repaid.
Most permanent policies offer a fixed premium for the life of the policy. Other plans offer flexible premiums and benefits to suit your needs.
The other option is term life insurance. This coverage provides affordable protection for a specified number of years. Term policies range from 5 to 30 years, many of which are annually renewable after the initial term. Look for a term policy with a conversion privilege. This permits you to convert your term policy to a permanent policy without providing evidence of insurability.
Consumers often choose term policies because of significant coverage needs, and affordability is always a factor. However, a term policy is only in force for a specific time, and once it expires, you lose the death benefit unless you renew. Renewal costs can be sky-high on these policies.
Since there are many issues to consider with your family’s life insurance needs, it is important to discuss your options with your insurance agent. That way, your family will be financially prepared if they lose the person upon whom they are so dependent.