Hug Tax: Why Life Insurance is More Expensive for Families

by Andy Hough on February 26, 2014

A family is always rich in love, but the enormous expenses involved with providing room and board to cute little people without jobs often means that financially, they cannot accurately be described as such. On the other hand, couples without children typically have income that is not spent on toys, candy and incredible shrinking clothes as well as each other’s undivided affection. The bond that a family of any size shares makes it important to protect them no matter what happens, and a life insurance policy is a great way to have that peace of mind.

However, life insurance is frequently more expensive for families than couples. Generally, the more a policy is worth, the more expensive the premiums will be. While the policyholders can have similar profiles as far as age and health level, the added responsibilities parents have usually require more comprehensive coverage in order to protect all aspects of the family.

Households with two working adults and no children are known as DINKs for “Dual Income, No Kids,” and for those DINK households with roughly equal incomes, life is fairly simple: everything is split in half. This means that in order to be effective, a member of a DINK household only needs a policy worth enough to pay for half of any outstanding mortgage, bills and debt.

It should also pay for the full funeral expense because death is ideally not a team sport. This number varies depending on the amount of assets a couple needs to protect, but in many cases it is a straightforward formula.

On the other hand, each parent in a household with children has much more to consider. A policy for a head of a household with children must also provide financial security for multiple people instead of just one. Along with final expenses and funds to help the family through the transitional phase, families with children often choose policies that can provide for their children’s college education in the event of their death, and these policies have higher rates than standard policies.

Many households with two working parents also have wages at two different levels, and in this case the primary breadwinner will have to carry a much more expensive policy to provide for the lost main income source.

While losing a spouse is devastating, losing a parent is even more so, and a life insurance policy for a married person with children must ensure that the loss is minimally disruptive. Overall, life insurance is more expensive for families with children because their lives are so much more valuable to those who depend on them. The warmth and love that a family shares is priceless, but it does come at a cost.

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