Since we usually associate life insurance with replacing lost income the idea that a homemaker needs life insurance may not seem as important. But when you consider what will be lost upon the death of the homemaker, life insurance and the amount of coverage needed is seriously underrated.
Though there may not be a need to replace lost income, the loss of the homemaker will create a number of financial needs that did not exist previously.
Taking care of the obvious
The most basic need for life insurance centers on costs that are pretty typical to all of us. First on the list is of course burial expenses. At a minimum, the homemaker probably will need at least $10,000 in life insurance just to cover funeral related expenses.
But beyond funeral costs, there could be unpaid medical bills as a result of a series of treatments prior to death, as well as a host of other expenses incurred as a result. Some of those could include additional childcare expenses, travel expenses or even a pile of unpaid bills as a result of the confusion and busyness that often consumes a family in the last days of a loved ones life. Much of those expenses might end up on credit cards that will need to be paid off.
Childcare and domestic expenses
Though a homemaker does not earn wages in the sense that the primary breadwinner does, she or he provides dozens of domestic services with substantial costs if they had to be paid to an outsider. That’s probably exactly what will happen upon the death of the homemaker.
If you have very young children, there will need to be some form of childcare – probably in the home. There might also be a need for home cleaning services and payment for various other functions that the homemaker will no longer be around to provide. The combination of such expenses can easily cost $2,000-$3,000 per month, and that will need to be paid at least until the children are old enough to take care of themselves.
Re-settlement/transition costs
Life does not always go on as “normal” upon the death of a family member. One possibility is that the breadwinner may go through enough stress and crisis that will result in the loss of a job. If it does, the family will need money to help cover the transition into a new job or career. It may even be necessary to take some time away from work.
Another possibility is resettlement. Often after the death of a parent, the family relocates to be closer to family, as a way of providing direct care or at least closer proximity to extended family. That resettlement will obviously cost money for the move, and may also result in lost wages or even reduced wages upon finding a new job in the new location. If the homemaker has generous life insurance, those costs will be provided for.
Providing children with a college education
This is probably not something most families think about when it comes to life insurance, especially when it concerns a homemaker. At some point the children want to go to college, and that will have to be provided for financially. In many households where there is a homemaker, he or she will take a job to help pay for some of the costs of college for the kids. It often happens when the children become teenagers and the domestic responsibilities become light enough for the homemaker to start working outside the home for extra money.
But if the spouse dies, that potential source of revenue will disappear. Having an adequate amount of life insurance for the homemaker can help to cover this important but lost source of income for college financing.
If there is a nonworking spouse/homemaker in your household, does that person have a substantial amount of life insurance?
