Protect Your Family.
When you make the money to support your spouse, kids, or both, you might worry about what they would do if you were to die. Would your children have a future? If you have very young children, you have to think about how the will get food, shelter and school expenses not to mention how they will be able to go to college or get a vocational education. You can calculate the cost of raising your child from birth through college using the handy calculator at babycenter.com. Use this calculator or the one at USDA.gov to figure out how much money you would need to raise your kids if you were not there to earn that money for them.
The amount you spend to raise a child these days on average is best presented by the infographic from the USDA website:
So not including college, the annual cost of raising a child from birth to age 17 in the United States is $233,610 in 2017. To use this figure for life insurance decisions, you would need to consider how many children you have and the expenses your spouse might have over their own lifetime. Then you decide if you want to buy life insurance to cover those expenses annually or if you want to provide one lump sum when you die, then leave it up to your spouse to use the money wisely and spread it out over his or her lifetime and the lifetime of the kids.
Your spouse will have a different life when you’re gone expenses may be different then than they are now. There may be more child care needs or there may be different healthcare expenses if the health insurance was coming from your employer when you were alive. Good planning means considering every possibility and planning as best you can.
You may have life insurance through your employer. This is temporary insurance. It is there for you while you are working for that employer. It is usually not enough to keep your family going for very long. Consider the cost of raising a child. If you have two children, your spouse will need $464,220 in today’s dollars to raise those kids. Then there is the amount your spouse would need to live if they aren’t working or don’t have a career path that would be enough to keep the household running. Most people buy their own temporary insurance to cover these needs, it’s called Term Insurance.
If your kids are – for example – two and five years old and you make 40,000 dollars per year, you could buy $1,500,000 of term life insurance. Your spouse would have $464,220 to raise both kids and have $1,035,780 to keep the household running for about 25 years based on it needing $40,000 per year to run. Of course, there is overlap between the cost of raising the kids and keeping the household running. This is a very simple example. We have not discussed inflation or the way expenses might change in the household without you in the picture.
You want to know how much it costs to buy this kind of insurance to protect your family for 25 years and put your kids through college, don’t you? Here’s an example. This is a quote on a 25 year old male who doesn’t smoke and is rated at “Preferred Plus” meaning no smoking, no high blood pressure, obesity, bad health, bad driving record or other high risk to the insurance company:
This quote was run on June 12, 2017 for twenty-year term insurance with highly rated insurance companies rated above A on AM Best’s rating scale. Notice it’s in the vicinity of $50 dollars per month. Would you spend $50 a month to make sure your family is protected if you aren’t there to take care of them? That is how people use life insurance to protect their family.