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Does Your Spouse Really Need Life Insurance?

by Neal Frankle

We spend a lot of time talking about how much life insurance you need. That’s great, of course, but the exercise is often left incomplete. Most people address this issue from the standpoint of the main wage earner alone. Once they figure out how much life insurance they need, the next step they take is to find the least expensive way to get that coverage. For most everyone, that trek typically starts and ends with term life insurance instead of whole life insurance. All that is good of course. But many people consider the subject closed once they take these steps and that can often be a mistake.

While this is a crucial process to go through, it’s also important to consider whether or not your spouse needs coverage. This is true regardless of how much they are making. Here’s why . . . .

Life insurance is meant to protect your family against the financial consequences of premature death. If you are the main wage earner and you pass away, your income has to be replaced. The best way to do that is to buy inexpensive term life insurance.

The value of the work a stay-at-home spouse provides is significant – don't underestimate it!

The value of the work a stay-at-home spouse provides is significant – don’t underestimate it!

But even if your spouse makes little or no money, there would still be a negative economic impact if he or she were to pass away. If your partner is a stay-at-home spouse, they run the household. If you’re at work, you’re going to have to hire somebody (maybe a number of people) to provide those services should they pass. The cost of hiring these people is what drives the amount of insurance you need on your spouse.

This is not a expense to overlook. Often the spouse who makes the least money provides the most important services that keep the famiy going. They often do the cooking, cleaning, chauffeuring, child rearing etc. The list doesn’t stop. All those services are going to be have to replaced if they die prematurely.

How much life insurance do you need on your spouse?

If your spouse doesn’t bring home much income and doesn’t help out very much at home, you don’t really need to buy life insurance for them. You see . . . there is always a silver lining!

And even if they do provide a great deal of support at home, keep in mind that your situation is bound to change each year. For example, if you have young children at home, the cost to replace that care is higher. But that expense dwindles as your kids age.

Let’s say you have one daughter who is 16 and is planning on going away to college in two years. If something were to happen to your stay-at-home spouse (heaven forbid) you’d need someone to take care of her for these two years while you are at work. Let’s say you calculate the cost of that care to be $45,000 a year. So, at this time, you need $90,000 in coverage on your stay-at-home spouse.

If you have younger children, you’ll need more insurance because there is more care and it lasts for many more years. You can use a very intricate process to determine how much insurance your spouse needs or you can dumb it down like me.

When we bought life insurance for my wife, she wasn’t bringing home a paycheck but she was working very hard keeping our children on track and running the house. We figured it would cost about $50,000 a year to provide that kind of care. Since our youngest was eight at the time, we just bought a $500,000 10-year policy and that was that. We probably could have purchased a little less but we just kept it simple. As it turned out our situation changed dramatically. We were blessed with another child so our life insurance needs increased and we bought more. This is why it’s a very good idea to revisit this issue every few years.

When you look at life insurance for your spouse this way, you can see that it’s very possible to save a great deal of money on life insurance too. By taking the emotion out of the equation and looking at the issue from a financial standpoint only, you are on a better track to buy enough life insurance to take care of your family but you won’t waste money on coverage you really don’t need.

Do you already have life insurance on you and your spouse? What kind, and why do you? Leave a comment!

Photo Credit: juhansonin


Published or updated April 4, 2013.
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{ 3 comments… read them below or add one }

1 krantcents

Both my wife and I are insured. We both have term life insurance for similar amounts to protect us for income loss until we retire.

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2 uclalien

“If your spouse doesn’t bring home much income and doesn’t help out very much at home, you”…have a trophy wife.

On a more serious note, I have 2 policies: a 20 year policy and a 30 year policy of equal amounts. I figure in 20 years my kids will be out of the house and we won’t need as much coverage. Plus, I should be self-insured to a certain extent through savings by that point. Since I am the sole breadwinner, my wife takes care of the kids and the house. As this article states, my cleaning, childcare, food, and other expenses would increase significantly. As a result, we also took out a smaller 20-year policy on her.

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3 Jake Erickson

My wife and I do not currently have life insurance, but we also don’t have any kids yet. We plan on getting insurance in the next few years before we have kids and we’ll use a similar method as you to determine what each person should carry in terms of life insurance.

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