One of the main functions of life insurance is income protection. Due to this, many advisors declare that life insurance is not for the unemployed. Insurance for a non-working spouse is secondary as insurance for children is tertiary. However, once it can be afforded, life insurance for an unemployed spouse has its merits. People are beginning to understand the contributions of a non-working spouse to the household. There are several reasons to consider insurance for a non-working spouse. They are a follows:
1) Replacement value- The spouse may be contributing to the general upkeep of the home, unless helpers are employed. This function could also be extended to childcare. These tasks have economic value and could be measured by the cost of replacing one’s spouse. If you lose your spouse, you may have to hire helpers to perform the functions that your spouse did freely. Simply put, the non-working spouse does not directly increase household income; but the absence of that spouse may reduce the disposable household income significantly.
2) Final expenses- A non-working spouse can be terminally ill or suffer any number of critical illnesses. Upon death, this spouse may leave several unpaid bills for the household to bear. Life insurance in this instance could mitigate the effect of these large expenses. Funeral expenses are often noted as a major reason to acquire life insurance. By itself, funeral expenses are only considerable to a family on the bread line.
3) Estate taxes and legal fees- A non-working spouse could have a considerable estate. Particularly if your non-working spouse inherited assets, life insurance would play a critical role in estate planning. It would prevent the beneficiary from having to liquidate the valuable assets or incur major legal expenses and executor fees. The life insurance policy can act as a buffer in this context. This protection product can also make the transfer and distribution of the estate a lot easier on the household of the non-working spouse.
4) Life insurance has other benefits- Modern life insurance plans are much more comprehensive than before. Increased competition ensured that companies offer value bundles to consumers with life insurance. There are savings, accelerated death benefits, critical illness riders and disability benefits attached to several life insurance plans. Purchasing a life insurance plan for a non-working spouse give them access to benefits that would be of value to them while they’re alive. Some of these supplementary benefits may also reduce financially crippling final expenses on the death of that spouse.
5) If your spouse becomes ill or disabled prior to death, you may also have lost income through extended leave from work. Having life insurance on your unemployed spouse would alleviate the additional burden of lost income arising from that situation. Also, sole income earners who have temporary employment should have life insurance on their spouse in the event that they are structurally unemployed after the death of the non-working spouse.
Taking life insurance on non-working spouses is not a way of cashing in on their death. Life insurance plans now are so diverse that there are several other reasons to acquire and maintain a life insurance policy for a non-working spouse. As demonstrated in this article, the life insurance component by itself would provide critical benefits to the beneficiary of a non-working spouse. Ultimately, it should not be top priority but must be considered if the means are available.