Life insurance is often thought of as the most effective way to replace a breadwinner’s income in the event of tragedy. Often overlooked however, is the need to cover the non-working spouse. Picturing life without your spouse is hard and most don’t like to do so, and for the advisor, it makes for a very difficult conversation about your client’s mortality. The fact is that a non-working spouse is as important to the family, if not more so, then the breadwinner. If, heaven forbid, the unthinkable does happen and a non-working spouse dies too early, the effect on the family will go far beyond the emotional grieving that ensues.

The financial ramifications of losing either spouse to premature death can be devastating. If that spouse is a stay at home parent, the ability to now pay for child care alone can crush a family’s budget. The working spouse, in order to continue the income stream they produced, will have to go back to work, but will likely want to do so only after they’ve had adequate time to grieve and console the kids. If that non-working spouse had coverage in the form of life insurance, they would be able to take the necessary time off before having to return to work allowing the family time to heal and plan for the future. Thus when the surviving spouse does eventually have to return to work, the affairs associated with the estate have been settled and planning for help with child care can be lined up.

There is no doubt that the cost of child care has skyrocketed in recent years. Ensuring there is enough life insurance coverage in place to pay for that necessary cost, will result in the family being financially secure and allow the other spouse to return to work. But the benefits don’t end with just child care. There are many things to consider if a non-working spouse dies. They were likely responsible for transportation, meal preparation, and other household activities that we take for granted in a one-earner household that would now need to be attended to, and if the breadwinner is to return to work, then those activities will need to done by someone else.

Furthermore, we haven’t yet discussed the real possibility that there may still be outstanding debt as well as medical bills that were accrued prior to the spouses passing. These medical bills can be huge! Life insurance doesn’t need to be expensive to provide the coverage a family like this needs, but the conversation must happen if we are to provide a holistic approach to the overall financial plan.

A good rule of thumb is to have a policy with 75% of the face amount then that of the breadwinner and this can be accomplished with an inexpensive 20 or 30 year term policy. Many of these policies today also include living benefit riders that may provide a portion of the benefit early if a major medical event occurs. This may very well allow a quality of life during the final months of an illness that would be unimaginable before. Stories of a terminal cancer diagnosis on a young father qualifies him to accelerate some of his death benefit so he is able to take his family on a memorable vacation to Disney Land are common with these types of policies. Imagine, as a financial advisor or insurance professional being able to bring the heroic news that that family will now get the money they need when they need it most!

There are real benefits for estate planning purposes as well. Whether a separate policy is used and placed in a trust for a family with a sizable estate, or a second-to–die policy is used, exceptions on the typical maximum of insurance allowed for a non-working spouse can be made. There is financial underwriting that occurs in each applied for policy. Insurance companies will make income exceptions for non-working spouses for a number of reasons. Knowing some of the guidelines, or having them at your fingertips when meeting with clients, will help you better present and explain the need for this insurance. We’re here to help. Let us know who needs this in your book of business, and we’ll leverage our resources to get these families the coverage they need.