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Should both spouses have life insurance coverage?

My husband has coverage through his work and I don't work at the moment (I stay home with our 2 young kids). It was recently recommended that I have a life-insurance policy as well. Is this worth the money since I don't have an income coming in?

Mar 08, 2012 by Tanya from Casper, WY in  |  Flag
11 Answers  |  13 Followers
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12 votes

Tanya, great question. This is a situation that is often overlooked. I speak from experience as my mother passed during my teenage years (without insurance). My father had to assume both parenting roles and manage a career. I watched as he made career decisions that he may not have made if he didn’t have to be mom and dad. Insurance does not change the fact that the surviving spouse will play both roles, but it will provide a financial cushion. Hiring someone to cook meals (insert numerous other tasks) would be a great help to your surviving spouse and your children. The cost of purchasing term insurance would probably be relatively affordable (assuming no major health concerns). Life insurance is purchased to help those left behind. You hope you never use it, but if something were to happen to you, your family will benefit from having one less concern in this emotional period of their life.

2 Comments   |  Flag   |  Mar 08, 2012 from Phoenix, AZ
Shawn

Hi, wanted to follow up with a question here. Wife and I are having a baby soon and we're discussing life insurance to protect us. She has a good job at Viacom which offers life insurance + supplemental life insurance. The supplmental is tax-deducted from her paycheck directly. Our thoughts are:

Flag |  Nov 30, 2016
Shawn

We would have her at ie. 200K supplemental, and myself 100k (or less).. Figures are in the air and to be discussed, but I'm curious if she does this (apply for supplemental through work), do you think we should also consider "term" life insurance as well? In the event she loses her job, or moves to another company etc. I'm torn weather we need the additional "private" insurance besides what her employer would be offering.. thanks, Bob

Flag |  Nov 30, 2016

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11 votes

Hi Tayna,

The answer is yes. Everyone else has already done a good job answering your question, especially Bob speaking from personal experience. Even before I started my investment advisory business I sold life insurance for years. I always advised couples to put some insurance on the spouse that did not work outside the home. Notice I said did not WORK OUTSIDE the home. I have been married for almost 28 years and there is no way I could replace what my wife does for our family.Take some time and sit down and figure out roughly what your husband would have to pay someone to do all the things you do. Forget about family that will help. Sure they will help but you don't want to be a burden on anyone. Please for your childrens sake consider buying some term insurance. Buy a term long enough that gets you until your children are through college.

Comment   |  Flag   |  Apr 07, 2012 from Loveland, OH

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7 votes

Maybe. Life insurance exists to fill a need: a need for protection. ( It is not an investment and any cash value build up should be a secondary consideration to the need for protection) You can do a simple analysis: how much income would each spouse need if the other was not around? Please consider that the income needed today will rise in REAL terms because of inflation. Then, back in to what the lump sum required is to generate that amount of income - using a realistic after tax return, (5% or 6%). If your current liquid assets don't equal that amount, you need to fill that gap with life insurance. In the case of a non-working spouse, as the other advisors have stated, the amount of income needed is often usually the amount needed for child care. With a income generating spouse, it is the amount needed to cover all living expenses. Each scenario is vastly different, hence a personalized analysis is helpful here. If you have any specific questions on this topic, feel free to reach me at 516-240-6161 or evan@completeadvisors.com Best of luck!

Comment   |  Flag   |  Apr 07, 2012 from Port Washington, NY

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7 votes

Yes, it is very important that both spouses have life insurance coverage. Many times people overlook the fact that a stay at home mom is a very important job that if you put a dollar sign on it, you would be surprised at what a high salary it would be. To express my point further, how much would the following cost if you had to pay someone to do this for you:

• someone to go grocery shopping for you • childcare while you are at work • housekeeping • having meals prepared • errands run during the day • and much more

Now, you may say... well, I don't need to pay someone to do all of the above... but, imagine working a full time job. You could take your children to the grocery store with you, have them watch TV while you prepare meals and clean your house. They could sit in the car and run errands with you, etc. Get my point? If one of their parents just passed away, I feel the most important thing to do is spend quality time with your children when you come home from work and not have them do the job with you that the stay at home parent did beforehand. Is the working spouse's income enough to pay for someone to come in and do all of the above? If so, there may not be a need... but if spending an additional $2k - $5k (or more depending on your lifestyle) will hurt your cash flow, you will definitely need to look at life insurance for the stay at home parent.

Melissa Levin, CFP® CA Insurance Lic #0C56086 714-547-8787

Melissa Levin is a LPL Registered Representative with, and securities offered through LPL Financial, Member FINRA www.finra.org /SIPC www.sipc.org

LPL Tracking #1-073729. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individuals. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

Comment   |  Flag   |  Jun 08, 2012 from Cowan Heights, CA

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6 votes

Hi Tanya, Even though you don't earn an income, you have economic value - if you died last week, your husband would need to engage someone to help run things at home and stay with your 2 children. At the very least, you can calculate the value of doing that until both children start college. It's true there is some cost savings if you aren't alive (sorry to put this in such bald terms) but your contribution outweighs any savings if you're not available to care for your children. You also have future economic value if you have a profession and might return to work in the future - life insurance can replace your future income by assigning a certain value to a potential income.

Comment   |  Flag   |  Mar 08, 2012 from Berkeley Heights, NJ

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6 votes

Dear Tanya - I would echo the advice of Bob and Eve. In developing a financial plan for a client, I consider expenses, not income, to determine how much life insurance coverage to purchase. Someone with no dependents may not need much, if any, life insurance. But if you have dependents, you need enough insurance to cover the direct and contingent costs of providing for them after you are gone.

Insurance for a non-working spouse (non-working as defined by the IRS) is designed to cover a contingent cost. If you were not around to run your household, your family would be faced with a new, significant expense to employ someone who could help your spouse with child care, cooking, cleaning, driving, etc. To get a rough idea of the amount of life insurance coverage you should purchase, estimate this contingent expense and multiply it times the number of years it would be incurred (18 less the age of your youngest child).

There are more complex models to develop finer estimates, but a quick and dirty approximation should be adequate for your purpose. Term life insurance is very cost-effective, so my advice is to err on the side of caution and buy a bit more coverage than you think you need. I hope this helps.

Comment   |  Flag   |  Mar 08, 2012 from San Francisco, CA

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4 votes

While each situation is different, most of our firms clients are retired and have sufficient assets to last them the rest of their lives - not a situation where life insurance would normally be considered as "needed". However, there is a niche but significant opportunity here, and it applies to couples of all ages - regardless of other financial assets, whether they have children or not, or whether any traditional "need" exists.

The use of a Guaranteed Death Benefit, Level Premium Universal Life Insurance policy on each spouse in an amount between 10% to 25% of current net worth (higher if IRA assets comprise a higher percentage of net worth) is in order. Use a policy which has an accelerated benefit for Long Term Care events, and the "expense" of Long Term Care insurance is replaced with a known, identifiable rate of return at normal life expectancy. In this regard, the Death Benefit may be viewed as an additional "asset class" in the context of the financial portfolio that remains for a surviving spouse or legacy for children. The fact that the life insurance death benefit is income tax free makes it an even more attractive asset class. In larger estate situations, the insurance may be removed from the estate through the use of an Irrevocable Life Insurance Trust.

The additional reason for insurance on both spouses is that when the first death occurs, the surviving spouse may use the life insurance procceeds to effect a Roth Conversion of part or all IRA assets - with the tax bill being paid with discounted proceeds from the life insurance death benefit.

1 Comment   |  Flag   |  Apr 21, 2012 from Plano, TX
lee

To keep it simple so all can understand and afford coverage the best option is in most case is to buy term if there is a need for coverage. There are various savings option that will provide you with beter growth and protection and income. Don't tie up any investment money inside your life policy

Flag |  Jan 24, 2014 near DeSoto, TX

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4 votes

Hi Tanya! Women are often interested in feeling secure, so having life insurance on the husband is desirable. Many men are comfortable with a more risk and they feel like they would be OK financially without insurance on the wife. I like to think of life insurance as protection for the whole family in case you die too early. In what ways would you want your family protected if you were not there to do it yourself? Many would at least want them to maintain the same standard of living that they currently enjoy. Thinking about how your absence would affect the day-to-day activities, as well as future plans for your kids can help you determine the right amount of coverage.

Comment   |  Flag   |  Apr 05, 2013 from River Hills, SC

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Life Insurance isn't just for dying, this is the byproduct of financial entertainers leading the discussion on life insurance. True financial planners look beyond the dying aspect. It is useful during your lifetime if you become disabled, send children to school, supplement retirement income, philanthropy or leave a legacy to family, charity or educational instution, church or support your core value when you pass away or wish to provide this during your lifetime. Work with an adviser that will give you the complete picture on how to obtain a rich and full personal and financial life.

Comment   |  Flag   |  Jan 09, 2013 from San Antonio, TX

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2 votes
Rich Winer Level 20

Tanya, While all of the answers you've been given are theoretically correct, the one and only answer that's correct in all situations is... IT DEPENDS. It depends on your financial situation as well as your goals and objectives. The second part of my answer is a recommendation to work with an insurance agent or financial advisor who will take the time to understand your individual situation, needs and objectives before making any recommendation. Life insurance can be used for income and lifestyle protection, investment purposes, college funding or to provide liquidity to pay estate taxes. The key is for you and your agent/advisor to determine and prioritize your needs and objectives and then determine whether it makes sense for one or both spouses to purchase life insurance. Beware of agents who try to force "one size fits all" beliefs on you or try to sell you expensive insurance products. Too many will try to sell you an expensive whole life policy when all you might need is less expensive term coverage. Make sure you understand what you are buying and why. I hope this helps.

Comment   |  Flag   |  Apr 12, 2013 from Woodland Hills, CA

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