You might not be getting paid to run the kids to school, do the laundry or fix the kitchen sink, but the day-to-day support you provide for your family can feel like a full-time job. And hiring someone to handle these tasks in the event of your death can be expensive, which is why life insurance can come in handy.
When calculating how much life insurance you need, you might not think to include these everyday tasks. The breadwinner's salary is often front and center. But if you undervalue the supporting services you provide, your loved ones may be left with unexpected costs.
The value of services that a stay-at-home parent provides often exceeds the breadwinner's income, according to Jessica Lepore, founder of Surevested, a life insurance agency. These tasks might include child care, cleaning, bookkeeping, budgeting and maintenance.
"So much is going to need to be done to compensate for that missing person," Lepore said.
The first step is to ask your partner what their life would look like if you were no longer around, said Mary Beth Storjohann, founder of Workable Wealth. How would your partner manage day-to-day tasks? Would they need to cut back at work? Would funds have to be diverted from savings? The answers help you determine how your absence would affect your family financially.
When you know which services your family would need to replace, calculate the budget to cover each one.
Don't forget debts you may owe. Mortgages are a huge trigger for life insurance, Lepore says. If you are a co-signer or co-borrower on a mortgage and help with the payments, the other signatory would be responsible for the entire debt if you died. By having enough life insurance, you can help the other person make the mortgage payments without you. If you are the sole owner of the property, the death benefit can help your life insurance beneficiaries pay off the mortgage and keep the house.
After you have calculated the financial impact your absence would have on your loved ones, think about how long the expenses will last. Child care may be unnecessary after a few years, while other costs may stretch longer.
Calculating your financial impact on others isn't easy, especially if you don't know how life insurance works or are intimidated by financial topics. The good news is that people are talking about money more, and there are places online to learn, Storjohann says.
Life insurance policies can last the rest of your life, so it's good to feel confident when making decisions about coverage. If you are unsure, talk to a fee-only financial adviser or insurance agent about policy options.
E-mail: grose@nerdwallet.com.