You’re probably already aware that a parent with a job outside the house most likely needs life insurance to protect their loved ones in case something were to happen. But it’s not just breadwinners who need coverage—stay-at-home parents do, too. Here are nine reasons why.
1. To replace the value of their labor. Stay-at-home parents are caretakers, tutors, cooks, housekeepers, chauffeurs, and so much more 365 days a year. And all that work comes with a price tag: Salary.com reports that stay-at-home-parents contribute the equivalent of a $162,581 annual salary to their households. If the unthinkable were to happen, a surviving partner would be on the hook for a slew of new expenses that the stay-at-home parent previously shouldered. Term life insurance is generally a quick and affordable way to get a substantial amount of coverage like this for a specific period of time, such as 10 or 20 years—often until you pay of your mortgage or the kids are grown and gone.
2. To factor in the contributions of any future income. Many stay-at-home parents return to the workforce once their kids are older. Life insurance could help bridge the gap that their future earnings would have contributed to the household.
3. To pay off any debt. From student loans to credit card debt to an informal loan from a family member, there are lots of ways to owe money. Life insurance can help settle any debts left behind so they don’t create stress for grieving loved ones.
4. To cover funeral expenses. Would you believe that the average funeral runs between $7,000 and $10,000, according to parting.com? And that may not cover the cost of the burial, headstone and other expenses. Many families want to honor a loved one’s memory, but have trouble finding the funds to cover all the costs. Fortunately, the payout from a life insurance policy can help cover final wishes.
5. To leave a legacy. If a stay-at-home spouse has a passion for a place of worship, an alma mater, or another nonprofit organization, life insurance proceeds can be used to leave a meaningful charitable gift.
6. To boost savings. Permanent life insurance, which offers lifelong protection as long as you pay your premiums, may offer additional living benefits such as the ability to build cash value. This can be used in the future for any purpose you wish, from making a down payment on a house to paying for college tuition. Keep in mind, though, that withdrawing or borrowing funds will reduce your policy’s cash value and death benefit if not repaid.
7. To guarantee insurability. Your health can change in an instant. Getting a permanent life insurance policy when you’re young and healthy means you’ll have lifelong coverage. Then you won’t have to worry if later on you develop a health condition that would make it hard or even impossible to get life insurance.
8. To receive tax-free benefits. Life insurance is one of the few ways to leave loved ones money that is generally income-tax free.
9. To give loved ones peace of mind. Losing a parent and partner before their time is already hard enough without having to worry about unsettled debts, childcare costs, funeral bills, and other expenses.
As you can see, life insurance for stay-at-home parents is just as important as it is for parents who work outside the home. Schedule a time to talk with an insurance professional in your community to learn about your options and get coverage that fits your lifestyle and budget.
Could you imagine what the total cost would be of having your own personal chef, nurse practitioner, counselor, bookkeeper, decorator, chauffeur, cleaning lady?
It would cost a ton!
If you’re a mom, you’ve probably just realized that I just listed some (definitely not all) of your daily duties of being a mother.
It is very common in many households where the breadwinner has purchased plenty of insurance to cover them, but what about the stay at home mom who performs many of the above tasks on a daily basis?
The fact remains is that many moms either don’t have adequate life insurance coverage on them or, even worse, don’t have any life insurance coverage at all!
Trust me when I say this: most dad’s wouldn’t survive one day without you. My wife is the CEO of our household and without her kids would not get fed, homework would not get done, and I would be a complete wreck.
Salary.com published a recent study that estimates that stay at home moms work on average 94 hours a week and are worth an equivalent salary of $113,000.
What Types of Life Insurance Should You Consider?
An ongoing debate exists between whether to buy term or permanent insurance otherwise known as whole life.
Let’s look at the differences of term life vs. whole life to see which one might make sense for you.
Term life insurance will cover you for the term that you’ve purchased. For example, if you buy a 20 year term policy then you will be covered for that 20 year period and it expires afterwards. Term life insurance is the most affordable type of life insurance that you can buy.
Whole life insurance does not expire and gives you coverage for your “whole life”, or for as long as you keep paying for the premium. Whole life also offers a cash value component meaning that after years of paying into it you can accumulate monies that you might be able to borrow off of to use to your preference.
The biggest disadvantage of whole life is the cost. You can expect to pay 10-20 times more for whole life insurance for the same coverage you would get with term.
If you’re budget is tight, I would stick to a cheap term life insurance policy.
The question arises – how much life insurance does a stay at home mom or spouse actually require, if any at all?
The amount can be determined by a professional in the life insurance trade – a professional life insurance advisor. He or she will undertake a “needs analysis” to come up with the amount of life insurance that is needed.
It’s common thought that a stay at home mom does not offer any contribution to the family in terms of an annual income. Therefore, why would she require life insurance?
In answer to that, we can quickly list a number of very important daily activities a typical stay at home mom has to undertake:
- General child care
- Driver (to the school, to the shops, etc.)
- House cleaner
- Chief accountant
No doubt there are other responsibilities besides those.
How much will insurance cost?
Term life insurance is surprisingly low-cost. Age, health, lifestyle and size of benefit are the primary factors affecting your premium rates. For a fraction of the price of a daily latte, most SAHMs can purchase appropriate term life coverage. Here’s an example:
- Healthy SAHM Mom, 35 years old, children ages 10 and 12. Annual worth (monetary value for all that you do) of $100,000.
- Term policy for 10 years (until youngest child is out of the house) for $1,000,000 (10x your annual worth).
- Monthly cost of $18.60.