Every time I run into the financial justification issue for a home maker I just want to scream. Most insurance companies still hold the stance that a home maker can only be insured for up to half of what the primary bread winner is insured for.
Companies have never been able to make a good argument for why one half is appropriate. They have guidelines for people who generate income that dictate how much risk they are willing to underwrite for someone at a given age. For example most companies would allow up to 20 times annual income for someone in their 30’s. Someone in their 50’s might only get 10 times income.
But, for the sake of many of my clients, most of them having some kind of impairment, let’s assume for a minute that the primary breadwinner is also a heart attack survivor. He had all the underwriting gargoyles glaring at him because he was only 43 (early onset CAD), was a type 2 diabetic (early onset diabetes) and had battled obesity all his life and had a family history of heart disease. He was a practical person and wanted to get life insurance in force because he sensed his mortality clock ticking, but he also had a budget. He knew if it cost too much it wasn’t going to stay in force so he had to make a choice of how much life insurance he could buy based on a set budget.
Because of all of his health issues and their early onset, let’s assume that although he could qualify for $1,000,000 based on age and income, his budget will only allow him the luxury of putting $250,000 in force. So does that mean that the life insurance company is going to allow insurance on the stay at home mom for only $125,000?
The good news is this fight can be won. The bad news is that the companies make it a fight every time. Some companies get so buried in their own illogical guidelines that it makes more sense to just apply for the full amount wanted on the homemaker and split it between two companies. It shouldn’t have to be that way.
Bottom line. Don’t hold your breath on the end of the dark ages with most companies. If you determine that you need more than the 50% allowed by their guidelines, work hard on the justification and if they don’t buy it, apply with two companies.