Life Insurance For Your Spouse

Why do you need life insurance for your spouse? Because the value of a stay at home spouse (usually the mother) is priceless in many ways. And the younger your children are the more insurance you will need to cover their care.

Many insurers will offer a discount if you sign up your partner. You could save between 5-10% on your monthly premiums if you take out a life insurance policy for both yourself and your spouse.

Before rushing out to get life insurance quotes there are a number of factors that you need to take into account when determining the sum to be insured for a stay at home spouse.

The value of a stay at home spouse

A study by the Australian Bureau of Statistics titled "Measuring the Value of Unpaid Household Caring and Voluntary Work of Older Australians" (2003) found that the value of a woman aged between 25 - 44 years doing housework, shopping and looking after the children was $45,617.

There are several ways of determining how much life cover you will need to take care of the home as well as the children.

First you need to calculate how long you will need to care for dependent children usually estimated to be from birth to age 20. So the estimated amount required to replace the duties of a homemaker could be calculated by multiplying 20 by $45,617 per annum = $912,340. If the dependent children are 13 years of age then this amount can be reduced to $319,319 as there would only be seven years required to look after the children till age 20. (20 -13) x $45,617 = 7x$45,617 = $319,319.

A report by AMP concluded that the cost of raising two children in Australia had reached more than half a million dollars from birth to age 21. An average middle income Australian family spends around $537,000 with the biggest cost being education food and childcare. The report also revealed that almost half of all adult children aged between 21 - 25 are choosing to remain at home.

As parents are burdened with large weekly costs it is imperative that there is insurance to cover the lifestyle of family members in the event of one or both parents dying or is incapacitated.

Factoring in the family debts

Other factors that need to be included when determining the amount of life insurance required for the homemaker are:

  • The family mortgage. The rationale behind this is that if the homemaker were to die then the breadwinner most likely will need to give up working or reduce the number of hours worked in order to be there to support the family emotionally. By reducing the number of hours worked adversely affects the ability to pay the mortgage.

The maximum allowable sum for a non working spouse is usually set at $1,000,000.

In conclusion

Whichever type of scheme would suit you, your family and your requirements best look into the policies currently available - because the longer you leave it the less likely you are to get life insurance for your spouse organised and the greater the risk you run of leaving your family in the lurch.

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Published on March 3-th, 2010 in Life Insurance
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.

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