Life Insurance: Why you need it whether you are the breadwinner or not
Most people have life insurance – whether it is coverage through their work/employer, through the bank (in the form of mortgage protection insurance), or to cover a loan for a business or farming operation (land purchase, machinery, or a buy-out/transition scenario). But what if one spouse is the primary breadwinner and the other spouse stays home? There is often an incorrect assumption that the non-employed or lower-earning spouse does not require life insurance.
This is incorrect as it does not consider the true financial value of a stay-at-home parent.
Childcare costs alone in Manitoba, at a registered, not-for-profit daycare centre can cost upwards of $12,000 annually (for one infant and one preschool age child). source: MB.Gov
If you were to hire a nanny to stay around-the-clock (8 am- 8 pm daily, 6 days a week) at the Manitoba average salary of $16.30/hour the cost to replace a stay-at-home parent reaches $61,000+ annually. source: indeed.com
Other services that would need to be replaced if a stay-at-home parent were no longer around: transportation, cleaning, meal preparation, etc. Often these same spouses assist with the business or farm operation (if their partner is self-employed) in the form of book-keeping, support during “busy seasons” etc.
If only one-person in your marriage or partnership holds life insurance, I would strongly encourage you to consider applying for coverage so that both parties are insured.
Things to keep in mind if/when you decide to apply:
What type of life insurance should I get?
Most parents would best be served by a term life insurance policy. The length of the term, in which the policy lasts for a certain number of years, usually coincides with the years that children are financially dependent. These policies are simple and relatively cheap. It’s also easy to compare policies and prices among providers.
How much coverage should I apply for?
Consider your financial liabilities – if you were to replace the cost of that spouse and their contributions to your household – for childcare etc., what would that amount be? Multiply that by the number of years your children would require care or be financially dependent. Think about final expenses (funeral costs) and any outstanding household debts you would need to cover in the event of your significant other’s death. Everyone’s situation is unique, and you should discuss your needs with your agent.
The bottom line:
It makes sense to apply for life insurance when you are young and healthy, whether you have dependents already or not, and to hold your own life insurance outside of work or tied to a specific mortgage or loan. If you switch jobs or change financial institutions owning your own life insurance policy means your coverage stays with you – not your employer (if you switch jobs) or bank. You can choose your own beneficiary and can convert your policy to a longer term or permanent coverage. Independently owned life insurance also allows you to have your policy underwritten from the start meaning you may be given a better rate if you have a healthier lifestyle or do not smoke. Stay-at-home spouses may not always work inside the home and their future income and earning potential must also be taken into consideration and factored into your family’s future financial plan.
Stay-at-home spouses may not think they require their own life insurance policies but as demonstrated above, it makes sense in the right circumstances.
If you are interested in obtaining a no-obligation quote or illustration for a life insurance policy – please contact me today.
Brooklyn Scott is a Financial Advisor/Mutual Funds Representative for Lewis & Jones Group/Desjardins Financial Group/Desjardins Financial Security Investments Inc. in Killarney, Manitoba.
Mutual funds are distributed through Desjardins Financial Security Investments Inc. For insurance products, Desjardins Financial Security Investments Inc. acts as a national insurance brokerage agency.