Don't Work? It Could Still Pay to Get Life Insurance for This Reason

Don't assume you don't need life insurance because you don't have a job.

Consumers often hear that it's wise to secure enough life insurance coverage to replace 10 to 12 times their income. The idea is that a sum like that could tide their loved ones over for many years if the policyholder were to pass away.

Because life insurance needs are often calculated based on income, you might assume that if you don't work (and therefore don't have an income), you don't need a policy of your own. But that's not always the case.

It's not just a matter of income replacement

For a household's sole breadwinner, the need for life insurance is clear. If that person puts a policy in place, their family will have some income at its disposal if the policyholder dies.

But that's not the only scenario where life insurance makes sense. Someone who doesn't work might still need life insurance if their death would result in financial hardship for their family.

Take for example a stay-at-home parent to two young children. Say that, because they are with the kids all day, their spouse can go out and earn a decent living. But if the stay-at-home parent were to pass away, their spouse could be left without childcare. That could impact the spouse's ability to earn money, and it could also leave them in the situation of having to spend thousands of dollars a month on childcare just to keep their job.

Or, let's say someone doesn't work, but they spend much of their time caring for an elderly parent. If that caregiver were to pass away, their parent might need to move into a care facility -- one that costs many, many thousands of dollars a year.

These are just a couple scenarios where someone's loved ones could get hurt financially in the event of their passing, even if they don't have a job and earn money. That's why it's a good idea to think through your unique situation and consider life insurance, even if you don't earn income.

Calculating your life insurance benefit

For those who work, there are formulas based on income to help figure out how much life insurance to get. For someone who doesn't work, however, getting to that number is a little bit trickier.

For example, a stay-at-home parent could consider buying a policy that would pay for full-time childcare until the kids are old enough to attend school -- with money left over for the surviving spouse to hire a housekeeper for help around the home.

On the other hand, a caregiver for an elderly parent might want to buy a policy that could pay for an assisted living facility for a handful of years.

To figure out what's right for you, consider your family's needs and circumstances when putting life insurance in place, even if you don't work. The last thing you want to do is leave your loved ones in the lurch unexpectedly.