You may be all set up to help your family in case the worst happens, but do you also need life insurance for your spouse? The answer to that question could impact how you and other family members fare in the (hopefully very unlikely) event of your spouse's early death. Here are some tips to help you evaluate your family's insurance needs — whether you have children or not — as well as for discussing this important topic with your spouse.
Coverage for Working Spouses
If your spouse dies during their working years, life insurance can be critical for income replacement. Even if your spouse works part-time, every bit of income can help support the family budget.
The stakes are even higher if you have children, as the loss of an income-earner can create new burdens for everybody in the family. You're left with only one income on which to raise children and work toward future goals. But life insurance could help fill in the gaps, including final expenses.
If your spouse has employer-provided life insurance, evaluate that coverage carefully. In many cases, employees only receive a small death benefit, which may not be enough to provide for a spouse or children. What's more, you might want to buy your own policy, which you can customize and keep for life (as long as you meet certain conditions and pay your premiums), regardless of changes in your spouse's job situation.
Coverage for Non-Working Spouses
A stay-at-home spouse performs an essential role for the family. While that individual may not make a monetary income, they perform a significant amount of work — which has its own monetary value. For example, they may care for children, cook, clean, manage household projects, provide transportation and much more.
If that spouse dies unexpectedly, you might not lose direct income, but fulfilling their past duties could take a significant amount of money. Childcare can be costly, and you'd likely have to fill additional household roles. You might then have to choose between working less (with a reduction in income) or hiring help — all the more reason to set up financial coverage beforehand.
A Difficult Conversation
But even if you've already decided your household would be better off with life insurance for your spouse, having conversations about death can be difficult.
If you're feeling intimidated, remember that your spouse — like you — wants what's best for your family. In fact, the conversation may be easier than you think: You've made it this far with successful communication through countless challenges in the past. The field might be new, but you're well-practiced in this game.
To start the conversation, just be honest. Express your concerns, and ask your spouse for input to figure out how to help protect your family. For example, you might say that you're worried about what would happen if one of you were to die in an accident. (Accidents can happen to anybody, after all.)
Ask your spouse what their wishes would be if you were to die early. Would they keep working? Would they face additional expenses or hardship? Then, consider the other side of the equation: Discuss how things might look if your spouse were to die first.
Determine the Level of Need
After you decide whether you need additional coverage, you can then evaluate exactly how much life insurance is appropriate for each of you. A qualified financial representative can help you with this, but you and your spouse should both be engaged in the process.
Look at your finances, and figure out how you'll support your spending if something happens. You already have daily expenses and housing costs, retirement and education goals, and other financial needs. Review your current budget and spending habits to get a realistic view of your living expenses.
Next, consider how your finances might change if one of you dies. You may want (or need) to send your kids to daycare, hire a housekeeper, take time away from work or pay off a mortgage. Add those new costs to your current living expenses to help determine an amount of insurance coverage sufficient to help protect you and your family.
The death of a spouse would be a devastating event, and it can be difficult to think about — let alone talk through. To the extent possible, find ways to help protect yourself and your family. Ultimately, it's just one aspect of the same thing you've been working together to provide your household: the very best.