Spouse Life Insurance - Is It Needed?
For young families, there are two primary concerns: child care and income replacement. A child care contingency plan is very important. If a service member has young children and loses his/her spouse, how will they provide quality child care, especially if faced with their military duties and deployments? The quick answer is often to rely on parents or siblings to help out. However, this places an enormous burden on family members and is often not practical. The option considered is to leave the service. This is usually a bad decision. High quality care such as a full-time nanny is good plan, but expensive. Having sufficient life insurance coverage on the spouse can provide an excellent source of funds for quality child care.
The second issue is income replacement. With or without children, many military spouses work today, and the family relies on both incomes to support the family lifestyle. Funds for mortgages, private school tuition, automobiles, etc. are often provided based on both incomes. What if the spouse's income were lost? Could the service member continue to afford the lifestyle that the family has grown accustomed to? Here again, life insurance coverage on the spouse could provide the funds necessary to replace the lost income. How much coverage is needed? The military spouse will often need more life insurance coverage than the service member. This is because there are extensive survivor benefits in place when the service member dies. These benefits come directly from the government and not from individual life insurance. There are no such benefits in place if the service member's spouse dies.
What type of insurance should be considered? The child care protection is a temporary need. The need will end when the children are old enough to care for themselves. So this is the ideal situation for term life insurance, which for a young spouse can be very inexpensive. Note that Service members Group Life Insurance (SGLI) now provides up to $100,000 of coverage for the service member's spouse. However, that amount is inadequate in most circumstances and so an individual policy to replace or supplement the SGLI coverage is usually necessary.
Income replacement protection may or may not be temporary depending on the family's overall financial plan. In this case, term insurance or permanent insurance (whole life), or a combination of both may be desired. As stated before, term insurance provides excellent coverage for temporary needs. Whole life insurance with its tax-deferred cash value growth can be an important part of your overall financial strategy. Some whole life plans have Long Term Care Options which can be very valuable especially for female spouses whose need for long term care protection is usually greatest. You may want to consult a life insurance professional to discuss what is best for your family.
In many cases, a family can be more devastated financially by the death of the spouse than by the death of the service member. However, most military families fail to adequately insure the military spouse.
About the Author: Mike McHugh is a Chartered Life Underwriter (CLU), Chartered Financial Consultant (ChFC) and the Vice President of Membership for Navy Mutual Aid Association.
Article Provided by Navy Mutual Aid Association (NMAA) . NMAA (serving the Sea Services, Navy, Marine Corps, Coast Guard, Public Health Service, and NOAA) 1-800-628-6011 www.navymutual.org has been insuring the family protection needs of military families for over 125 years and has counselors available that can discuss life insurance options for your family.