Monday, April 16, 2007

Idea #2 for How Not to Become a Needy Nitwit: Get Some Insurance

This is the third post in a series that is responding to the book The Feminine Mistake. To better understand the purpose of this post, read this post first.

I'm always amazed at how many young families don't have life or disability insurance on their main bread winner. I know it is an extra expense, but you CAN'T afford NOT to have it---especially when you have young children at home.

How much life insurance you need varies from family to family. According to Larry Burkett's book, The Complete Financial Guide for Young Couples, factors to consider include "the age of the children, the wife's income capability, existing debts, current lifestyle and income, and any other sources of after-death income besides life insurance. One family may wish to supply enough insurance to live off interest income alone while another may wish to provide for a specific number of years." A rule of thumb is to purchase 7 to 10 times the breadwinner's salary.

You may also want to consider having life insurance on you as the SAHM. Why? Well, if you would die your husband may now have to pay for services that you previously provided like childcare, housekeeper, etc. (Every year a study is released that attempts to put a value on all the tasks a SAHM provides. This last year, the study placed the value at around $600,000). At the very least, a small policy would help cover funeral expenses.

There is also the question about whether to purchase term or whole life insurance. Term is less expensive and provides the best value for young couples.

If your spouse is injured or has a prolonged illness, disability insurance can help fill the financial gap that could occur if they are off work for an extended amount of time. The downfall is that disability insurance is expensive. So you need to really weigh the risks with the rewards.

Many times, the breadwinner's employer will provide some type of life or disability insurance, however, if that policy won't cover your family's needs, you may want to purchase a second policy on your own.

Of course, you should always do your homework to make sure the insurance you buy is right for you and your family. Consult a financial planner or advisor for professional advice.

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