Life insurance isn’t just for the breadwinner in your family. Stay-at-home parents need cover too, writes Neil Faulkner.
As the main earner, the benefits of protecting my family from my lost income are obvious.
However, we have also insured my girlfriend to cover her valuable services as a full-time mum.
If you have a family and the main earner dies, the remaining family members could suffer serious financial difficulties.
Future financial protection
The solution is to buy life insurance. The beneficiaries could get a lump sum in the hundreds of thousands, or a regular income.
What's more, life insurance has got increasingly cheaper over the past decade and is arguably the best-priced of all consumer insurances.
It might cost a non-smoking 30-year-old less than £10 a month for a 20-year policy that would pay out as much as £200,000.
Stay-at-home mums
Naturally I have bought life cover to ensure that my dependants are cared for if I die.
What many may not think of however, is stay-at-home parents and their valuable service to the family which will also need to be replaced if they die.
As a home-maker, she is saving us a fortune in home and child services.
If she were to die, I would have huge childcare costs to pay, which I wouldn't like to have to do on my income alone.
If the breadwinner has precious little time – and is less stingy than me – consider paying extra to cover the other valuable services that home-makers do, such as cleaning, washing and shopping.
Joint policies
To save even more money, you can buy joint life insurance policies instead of two separate ones, which will pay out on one of your deaths only.
Either of you can take out the policy on either your own life or the other's, and you can name yourself or the other as the beneficiary.
If you're only looking to cover childcare costs you can quite easily add up how much that costs in a year.
Add some extra for inflation and multiply it by the number of years you need it, and you've got a rough estimate of how much cover is required.
Don’t forget about possible schooling and college costs as well.
Future income protection
If a death would result in loss of income, you might want to consider how much income after tax you're likely to be losing between now and when your children become independent.
Work out how much of that income you would need in the future.
Any payout should be tax-free if you have set up your life insurance policy in trust, so ensure you check the paperwork, or with the insurer, before signing up.
Amending your cover
If your circumstances change, you can usually cancel life insurance policies at no cost, or take out additional ones if you're under-insured.
You can also switch again if a cheaper policy becomes available.
Check if your employer offers a payout to your family if you die. This is called death-in-service benefit and it might mean you don't need to buy as much life insurance.
