life insurance

A Lesson in Life Insurance

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Death is a complex topic, and not just in an existential manner of speaking.

Similar to birth, death involves planning, time and financial resources. Life insurance plays a role in this kind of planning, as financial protection for your survivors and dependents upon your death. A life insurance policy is a sum of money for designated survivors that amounts to a value that you would in your livelihood.

While people don’t walk around with price tags stuck to their foreheads, life insurance puts a monetary value on life so that it’s possible to come up with a financial plan for your family if and when your death occurs. And, because every member of a family contributes his or her own part, it is important for both spouses in a marriage to have life insurance.

Life Insurance: guaranteed financial security in the face of either spouse’s death

The government has  deemed life insurance so necessary for the military community that it set up a program to insure as many members of the military possible: the Department of Veteran Affairs-supervised Service members’ Group Life Insurance (SGLI).

According to the U.S. Department of Veterans Affairs website, eligible service members are “automatically issues the maximum SGLI coverage” of $400,000 of term life insurance for all eligible service members. While SGLI isn’t free, it is extremely affordable. The $400,000 of coverage, for example, equates to a $28 monthly deduction from the monthly paycheck.

Service members with life insurance know that, in the event of their death, their families will have some sort of financial security blanket to cover them as they adjust to life without them, and without their income.

While the bureaucracy has carefully evaluated and determined specific amounts to different components military service, the same has not been done for the people — spouses and other family members — who provide crucial support. It’s relatively easy to total up income, but it’s not so easy to calculate just how much a parent who stays at home brings to the table.

Thinking outside the box to determine death benefits

In today’s world, $400,000 does not get a family very far. As military families grow, it’s common to seek out replacement or supplemental coverage to SGLI. USDA statistics also show that the average cost of raising one child to 18 years of age is over $245,000. And military families are more likely to have young children at home than their civilian counterparts, so, it makes sense that military families would find SGLI alone inadequate.

Even if a military spouse does not work outside the home, he or she does contribute to a family’s income. At the very least, a stay-at-home spouse preserves the primary paycheck. According to the National Association of Child Care Resource & Referral Agencies, the average cost of center-based daycare in the U.S. is almost $12,000 per year per child. To compound the amount of money that a stay-at-home spouse saves families, cooking and cleaning services are also no small cost.

Working parents who unexpectedly find themselves single parents will incur additional financial costs whether or not their deceased spouse brought home an official paycheck. Once you begin to count all the fees and expenses a stay-at-home spouse saves a household, it is easy to see how quickly the cost of professional services to do the equivalent amount of work would accumulate. Look at these costs to help determine the value of a spouse’s policy.

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The younger and healthier you are, the more affordable the premiums for any given policy will be. There are term policies, which expire after a certain number of years, and there are whole-life policies, which grow in cash value and also never expire. Life insurance needs vary with every family.

There are plenty of resources available to military families that can assist with life insurance. AAFMAA, for example, is the longest-standing, not-for-profit financial solutions provider expressly for the military, and recently announced its Spouse Purchase Initiative, allowing spouses of current and honorably discharged service members, the ability to purchase life insurance on themselves. Insurance providers are increasingly understanding the need for everyone to purchase life insurance regardless of income source. Military families especially know the importance of that hidden paycheck that spouses bring to the table.