We're all going to die.
With that out of the way, let's talk about death.
Today, I'm going to be Debbie Downer. You've been warned. But this is important stuff. No one wants to think about dying, but it's the kind of thing that once you've made a solid plan, you don't really have to think about again.
Most of us are Must-Have Parents (MHP) here. Many of us are Stay-at-Home Parents (SAHP), as well. Our partners are Must-Do Parents (MDP), and that means that our partners likely earn most of the income for our households.
We probably already have life insurance for our partners because we know that -- God forbid -- if something happened to him or her, we would need quite a bit of money to provide for our family in their absence.
Unless they've opted out (and here's why they should NEVER opt out), military members carry the Service Members Group Life Insurance Policy (SGLI),which provides for up to $400,000 in coverage. Some service members also elect to purchase additional life insurance policies so that they have more coverage.
But if we're not earning an income or not much of an income, how much life insurance do we need for ourselves? If something happened to one of us MHPs, our family would still have the MDP's income, so do we even need life insurance at all?
The answer is yes. Yes, we do. Absolutely. Yes.
Think about it: You've probably been asked on social media to contribute money to a family that has just experienced the tragic, untimely death of a loved one. Dying, and particularly burying, is expensive in our culture, and people who don't expect to die usually haven't planned for it financially.
We give to those funds because our hearts bleed for those families and we want to help them. We also give because, as decent human beings, we don't want a family that is already stunned by a loss to be stressed over how they're going to pay for all those unexpected expenses.
According to Bankrate.com, the average funeral in the U.S. costs between $8,000 and $10,000. So that's the smallest piece of the extra money your family is going to have to come up with immediately if you die. You all got that much just sitting in an account right now? Didn't think so.
So start with $10,000. You need at least $10,000 in life insurance for yourself.
Now, if you are a military spouse, you MIGHT already be covered for up to $100,000 under the Family Servicemembers' Group Life Insurance (FSGLI) program, which covers spouses and dependent children of service members who are insured under the SGLI program. Dependent children are insured at no cost.
But I used a big word up there, might. Some spouses are automatically enrolled in FSGLI, some are not. Rather than give you misinformation, I'm going to suggest that you click on this link, think about your own situation and determine for yourself where you stand.
Even if you are covered by FSGLI, many finance gurus say $100,000 worth of life insurance is probably not enough to cover a SAHP.
Dave Ramsey says a SAHP needs more along the lines of $300,000 to $400,000 in life insurance.
"Financially speaking, it's going to take $35,000 to $40,000 a year to replace all the things she does," Ramsey told someone who asked that very same question. "Your wife may not bring home an actual paycheck right now, but there's a ton of personal and economic value attached to everything she does every day!"
Likewise, Jeff Rose at GoodFinancialCents.com says you should consider how much it would cost for the MDP to pay people to do many of the things you do now. He also says that you might consider adding enough coverage to pay off a mortgage or other bills so that the MDP will have some financial concerns removed from the budget, thus freeing up funds to pay people to help with childcare and household work.
The amount of insurance you need will also vary based on your geographic location, the number of children you have, the MDP's salary and job security, your overall health, your family's debt and other factors. Rose says if you owe $250,000 on your mortgage and you have three kids, a life insurance policy of at least $500,000 is probably in order.
In other words, my family is currently $400,000 underfunded.
There are lots of life insurance calculators online, like this one from LifeHappens.org. (They also have an app!)
Plug in your own family's details, assess what benefits you already have, make your own worst-case scenario plan -- and then go live happily ever after.
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