Consider the value of everyday tasks when buying life insurance

You might not get paid to drive the kids to school, do the laundry, or fix the kitchen sink, but the day-to-day support you provide for your family can feel like a full-time job. And hiring someone to take care of these tasks in the event of your death can be expensive, which is why life insurance can come in handy.

When calculating how much life insurance you need, you may not think of including these daily tasks. The breadwinner’s salary is often central to estimating a family’s coverage, as it is important to replace this income if the primary breadwinner dies. But if you underestimate the support services you provide, your loved ones may end up with unexpected costs.

The impact of unpaid assistance

Families often overlook life insurance coverage for a stay-at-home spouse, says Mary Beth Storjohann, certified financial planner and founder of Workable Wealth.

Yet the value of services provided by a stay-at-home parent often far exceeds the breadwinner’s income, according to Jessica Lepore, founder of Surevested, an artificial intelligence-powered life insurance agency. These tasks may include babysitting, cleaning, bookkeeping, home improvement, budgeting and maintenance.

“So many things are going to have to be done to make up for that missing person — even if it’s not someone with a traditional job,” Lepore says.

Knowing how to accurately assess your contribution, whether you are a stay-at-home parent or have a part-time job, can help you create a strong life insurance plan for your family.

How to accurately assess the financial impact

The first step in assessing your coverage needs is to ask your partner what their life would be like if you were gone, Storjohann says. How would your partner handle daily tasks? Would they need to reduce their work? Should funds be diverted from savings? The answers to questions like these can help you determine how your absence would affect your family financially.

When you know which services your family should replace, you can calculate the budget to cover each one.

“What would it cost to bring in outside help for these things if you were no longer able to fulfill your role?” asks Storjohann. These costs can vary significantly by location. For example, center-based child care can cost twice as much in California as it does in Alabama, according to 2020 data collected by Child Care Aware of America, a research and advocacy group.

Don’t forget any debts you may have. Mortgages are a huge trigger for life insurance, Lepore says. If you are a co-signer or co-borrower on a mortgage loan and you help with the payments, the other signer would be responsible for all of the debt if you die. By having enough life insurance, you can help the other person make the mortgage payments without you. If you are the sole owner of the property, the death benefit can help your life insurance beneficiaries pay off the mortgage and keep the house.

After calculating the financial impact your absence would have on your loved ones, consider how long the expenses will last. Childcare may be unnecessary after a few years, while other costs may linger longer.

It’s a good idea to take a look at your financial impact after big life events, like getting married, having kids, or filing for divorce. For example, if your children are older and no longer need child care, you may want to adjust your coverage.

Help is available if you need it

Calculating your financial impact on others is not easy, especially if you don’t know how life insurance works or be intimidated by financial matters. The good news is that people are talking about money more and there are places online to learn, Storjohann says.

Life insurance policies can last the rest of your life, so it’s good to feel confident when making decisions about coverage. If you are unsure, speak to a financial adviser or paying insurance agent about policy options.

“It’s really important to understand that the value of a person’s life is not just their paycheck,” Lepore says. “What they bring to the table is so much more than that.”

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