What kind of life insurance coverage is in place for your family? In this article, we look at an often-overlooked life insurance need – protection in the event of the loss of a spouse who is the primary caretaker.
Primary Caretaker Coverage
Let’s begin with a family in which spouse A is the primary breadwinner and Spouse B works at home, providing the primary housekeeping and child care for their three children under age nine.
Their family life insurance coverage provides for continuation of income upon the death of Spouse A. Traditionally, life insurance protects a family against the loss of the primary breadwinner. Since this person provides most (sometimes all) of the income, replacing this income is vital if the breadwinner passes away. Many families insure themselves this way, content that the family could survive even the death of the primary breadwinner.
But suppose Spouse B passes away instead – the person who was the primary caregiver for the three children. Spouse A still has a job, so the family income is essentially uninterrupted. But suddenly there are significant new expenses in the family budget. Daycare costs for one infant in Maryland can be $15,000 or more per year*, and this family has two other children under age nine who also need after school care and summer care. This substantial ongoing cost will continue for years. And this very busy full-time employee and now-single parent will likely need housekeeping services and face other unanticipated expenses.
In addition, Spouse A now has to arrange for the household repairs, take the children to their doctors’ appointments and after school activities, and shop for groceries and clothing. In some cases, Spouse A will hire a nanny to help with these tasks.
Income Replacement for Both Spouses
Now let’s look at a family in which Spouse A and Spouse B share income-producing and child-rearing duties for their three children under age nine. Because both spouses work to provide the family income, they have planned for income replacement if either working spouse passes away.
So what happens when one spouse passes away? In reality, the surviving spouse is faced with not one but two financial problems – a decrease in household income plus potentially higher child care and household expenses. Their income replacement insurance covers the sudden gap in family income. But this surviving now-single parent and employee will still have to deal with new unanticipated expenses.
Income Plus Anticipated Expenses
Adequate insurance coverage often needs to go beyond simple income replacement, as shown in these two very real situations. Family insurance coverage should take into account the financial and non-financial contributions of both spouses and anticipate the new expenses faced by the surviving parent/spouse.
Child care and housekeeping are significant ongoing expenses that can be anticipated and included in your insurance planning. Let GEBA’s Licensed Insurance and Financial Consultants help you work through these issues – and design a plan tailored to your family’s unique situation.
Enjoy the peace of mind that comes from knowing that you have helped to provide for your family’s financial well-being in the event that you or your spouse passes away unexpectedly.
* Child care costs in the United States, Maryland. Economic Policy Institute (October 2020) from https://www.epi.org/child-care-costs-in-the-united-states/#/MD.