Some may assume that since life insurance is intended to replace income, stay-at-home parents do not need life insurance if their spouse is the primary breadwinner of the family. However, this is not necessarily true—especially as it pertains to parents with younger children.
Replacing Services
Although stay-at-home parents do not make an annual income, we must consider the value of labor they perform in the household. If you are a stay-at-home-parent, think about how much money you would make if an hourly wage was assigned to the work you do every day for your family—there are no days off from being a parent. If something happened to you, who would cook, clean, do the laundry, help kids with homework, or drive them to soccer practice? When factoring in the cost of outsourced childcare, housekeeping services, and cooking, we can see that stay-at-home parents contribute a significant amount to the financial function of their household. If the other spouse’s income could not compensate for these expenses, it may be wise to purchase a life insurance policy for a stay-at-home parent.
Planning for the Future
Many couples decide to have one parent stay at home while their children are young with the intent that he or she will return to work once the kids are older. Life insurance on a stay-at-home parent may help compensate for this potential income as well. If you and your spouse are counting on one of you to return to work to help with significant financial responsibilities such as paying a mortgage or college tuition, it would be wise to insure both of you, not just the primary breadwinner.
So, How Much Life Insurance Do You Need?
Other factors to consider when purchasing a life insurance policy for a stay-at-home parent include the number of children you have, the job security of the working spouse, and the overall health of the parent. The stay-at-home parent can typically get approved for a policy that covers 50% of the salary of the working spouse. Term life insurance may be appropriate if you are looking for guaranteed coverage for a specific amount of time—for example, until your mortgage is paid off. On the other hand, purchasing a permanent life insurance policy when you’re young and healthy means you will have lifelong coverage to continue to help support your family. If you are a stay-at-home parent and have yet to purchase a life insurance policy, speak with an advisor to determine exactly how much life insurance is right for you.
