You and your spouse might agree that only one income can support your family. Therefore, the other spouse might be able to stay home to take care of the house, kids and other business. When setting up your life insurance options, you might wonder if this non-working spouse needs a policy on their own life. Indeed, they do, and here some more information about why.
Yes, Non-Working Spouses Need Life Insurance
Your spouse might not work outside of the home. They might have no income of their own, or they might do small jobs just to make ends meet. However, to assume that this spouse doesn’t need life insurance because they “don’t work” is wrong. Even someone who runs the home has a full-time job.
Therefore, this person has value as part of the family. The rest of the family relies on them in multiple ways. Meals, childcare, bill payments, maintenance—a stay-at-home spouse might do it all. So, if they were to die, that’s time and money lost.
If you decide to take out a life insurance policy on a stay-at-home spouse, you’ll be able to recoup some of the losses their death might leave behind. Therefore, the surviving family’s financial futures might remain more secure.
Why Non-Working Spouses Need Coverage
The death of a non-working spouse might not mean the ending of someone’s paycheck. However, it often does symbolize an increase in the potential financial hardships that might come to threaten your family.
For example, if you don’t have a spouse at home, you might have to hire childcare for your kids. Or, you might accumulate new expenses in home maintenance, food or supplies bills. With the death benefit from the spouse’s life insurance, you might be able to better afford these costs. Also, perhaps, you might decide to put that money away for future uses, such as a child’s college tuition.
How Much Coverage Should I Buy?
Since the spouse doesn’t have an income to replace, you might not know where to start when setting a value on their life insurance.
Nerdwallet.com recommends that the non-working spouse’s policy should carry at least 50% - 80% of the working spouse’s income, multiplied by the number of years until a child becomes financially independent.
So, say the working spouse makes $100,000 per year, and it will be eight years until the family’s children become independent. Your spouse’s policy might need to start at $50,000 x 10 years = $500,000 in coverage for the spouse. You also can usually set up the policy’s term to last until the child becomes independent. Then, regardless of whether the spouse has died or not, you might be able to end the life insurance policy because you no longer need the extra support.
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