Do Both Partners Need Life Insurance Coverage?
When a couple is shopping for life insurance, it’s easy to assume that only the partner who is earning most or all of the family’s income needs the coverage. After all, the underlying reason for many people purchasing this important financial protection is to replace the lost income of a worker who dies.
Life insurance does offer that relief, but insuring only the breadwinner is a mistake too many people make. In any household, both partners typically contribute meaningful work and value to the family. The loss of either would likely result in a need for extra cash, which life insurance can provide.
Read on to see why families should consider both partners in coverage decisions.
The death of either spouse or parent usually results in new expenses for a family.
“Whether the mom or dad is a stay-at-home parent, the reality is that in a single income household, both spouses carry a heavy burden,” says Joshua Brooker, principal & certified healthcare advocate at Pennsylvania Health Advocates in Lancaster, Pennsylvania.
For instance, if a stay-at-home parent dies—an unpaid job whose estimated market value equates to $178,201 annually, according to a 2019 estimate from the online compensation tracker salary.com—the breadwinner parent may suddenly be responsible for childcare, among other duties. He or she may have to change jobs, reduce hours at a current job, hire a nanny, or enroll kids in childcare. All of these options can be expensive, and life insurance proceeds could help pay those costs.
Even if children aren’t involved, the non-earning spouse may handle other duties such as housekeeping, scheduling appointments, providing transportation to doctors’ visits, and managing family affairs. “If someone has to pay separately for each of these jobs, it could add up to a full-time salary,” adds Pedro M. Silva, investment executive at Provo Wealth Management Group in Shrewsbury, Massachusetts.
Life insurance proceeds can cover existing debt and funeral expenses.
The death of a loved one always results in funeral or burial expenses, which can be expensive and stressful, especially when unexpected. When there’s a life insurance policy in place, the surviving spouse usually doesn’t have to add fear and worry about how to pay for funeral expenses on top of sorrow.
In addition, if the family has a mortgage or other outstanding debt, a life insurance payout can help tackle that debt. Families with a greater degree of financial security often find it easier to move on from grieving.
The grieving process can make it difficult to fulfill regular work obligations.
Losing a spouse or life partner can be devastating. A grieving spouse may need to take a leave of absence to come to terms with the new reality of being widowed. Having access to life insurance proceeds, which are typically income-tax free, can be a life-saving resource during such a difficult time.
The bottom line: The specific decisions you make about what type of life insurance policy to purchase, and how much coverage to include, are highly individual. They depend on a host of variables, including your age, current health, amount of debt, your earning power, whether you have children who are minors, and your hopes and dreams for your family. Choosing the right coverage can be complicated, but a key factor is the crucial role that each partner plays in your household. Regardless of income, a life insurance policy can be invaluable to the surviving spouse and family.
- Interview with Joshua Booker.
- Interview with Pedro M. Silva.
- Super mom: What's a mother worth? (n.d.). Salary.com.