When evaluating their life insurance, many couples assumethey only need life insurance for an employed spouse. After all, stay at homeparents, caregivers for elderly parents and other non-employed spousestypically don’t contribute financially to the household. In addition, many U.S. companiesoffer life insurance benefits to their employees, which typically aren’tavailable to a non-employed spouse.
However, often the contributions a non-working spouse makesto the family can be tremendous, and those contributions should be valued. Infact, a recent survey from Salary.com determined that a stay at home mom’ssalary, if she got paid for the 10 most common tasks she performs, would bejust over $117,000 per year. Because there is not an income to be replaced, manyfactors must be taken into account to determine the amount of life insuranceneeded, instead of simply calculating annual salary and multiplying it by afactor determined by the insured.
Some factors to consider when deciding how much lifeinsurance to purchase for a non-employed spouse are:
- How much would it take to hire extra support people, such as housekeeping help and childcare providers?
- Will the surviving spouse have extra expenses to cover associated with his or her spouse’s death?
- Will the surviving spouse have to cut back on hours at work in order to assume duties formerly provided by the non-employed spouse?
I strongly encourage my clients, when shopping for lifeinsurance, to consider not only replacing the employed spouse’s income, butalso to get an amount to replace the non-employed spouse’s familycontributions.