The conventional thinking census is to buy life insurance for the breadwinner, acknowledging that he or she responsible for all the family’s income and sudden death will cause financial hardship to survivors.
However, have you toyed with the idea of what would it cost to replace the work a stay-at-home parent does?
I’m not even talking about the value of motherhood or fatherhood—which is priceless. I’m talking about a daycare center, housekeeping, laundry, driver, and chef, just to name a few of the tasks we all take for granted (Go tell them how much you appreciate it!).
What is your guess to what it would cost to replace a stay-at-home spouse monetarily?
According to a Forbes post, they should be charging $115,000 per year for their duties. Let us not forget that the reason you can work out of the house is that someone else takes care of the stuff in the house.
Let’s find out if buying life insurance for a non-breadwinner partner is worth it.
How Much Is a Stay-At-Home Parent Really Worth?
Before diving into whether or not stay-at-home parents should get life insurance or skip it, let’s explore how much it would cost us should we need to replace them. I’m not suggesting that a spouse only contributes financially.
After all, how can you put a price tag on the invaluable love and nurturing moms and dads provide while staying at home with the children?
However, since life insurance deals with preventing financial catastrophe should someone die, it’s a reasonable assumption to figure out how much they are worth.
There are many schools of thought out there on the real value of a stay-at-home parent, and there is no obvious way to calculate it accurately but here are some things you can quickly figure. If both you and the spouse are working out of the house and had to pay for these:
- Daycare costs can range from $4,822–$22,631 per year based on the state you reside
- Cleaning service can be $160 per week and can cost more than $15,000 per year depending on the size of the house and how often you do it.
- General maintenance worker
- Laundry machine operator
- Event planner
- Professional chef (for some)
Here Is the Most Important Reason
Have you thought about if you (the surviving spouse) had to take off work for a year to grieve or even quit your job and just take care of your children and, therefore, were unable to work and carry yourself and the remaining family?
How do you suggest you keep paying the bills, food, and everything else above? Although having life insurance will never clear the mental and physical devastation after your loved one is gone, it sure will keep you and your children financially secure until you are ready to start a new path.
How Much Do Stay-at-Home Spouses Need?
There are many various ways of determining life insurance needs. The simplest one to follow is to multiply the income times 10. In our example, if a stay-at-home mom’s tasks are worth about $100,000 per year, you could buy million-dollar life insurance.
However, when it comes to a spouse that doesn’t work outside of the house, the maximum amount they can obtain must be equal to the amount the working spouse bought, and many times, stay-at-home parents buy 50% to 80% of what the breadwinner’s policy value is.
Additionally, whatever amount you decide to buy, make sure you can easily afford it for years to come to make sure the coverage stays in force should you need it.
Purpose of Life Insurance
Life insurance is meant to provide financial protection to beneficiaries in case an insured dies prematurely. In other words, a person can’t profit from someone else’s death (it’s not only immoral but unlawful), unless their passing away presents financial devastation to the survivors.
Simply put, life insurance’s primary goal is to protect the “true value of life”, as determined by how much he contributes to his loved ones financially.
From the insurance company’s viewpoint, they must make sure that individuals are buying the appropriate coverage for their situation. Here are some of the questions the underwriter may ask:
- What is the purpose of the insurance?
- How did you determine the face amount you applied for?
- Who will be the policy owner and premium payer?
- What is the current amount of in-force and applied-for insurance?
Which Type of Life Insurance Is Best for a Stay-At-Home Parent?
This question will open a Pandora’s box among many life insurance professionals, depending on what they sell. (This is another reason you should work with a broker who specializes in many products.)
For instance, if you have a medical concern and you go to a surgeon, he wants to perform a surgery. If you talk to another physician who is known to be a pill-pusher, he may prescribe medications. First, let’s understand the two main categories of life insurance which are temporary and permanent.
- Temporary protection is also called term life and covers you for a specific period, typically between 5 and 30 years. Your premiums and death benefit remain fixed for the chosen duration, and at the end of your term’s duration, you may convert the policy to permanent coverage, continue to pay annually, or drop it.
- Permanent protection is also called whole life and lasts for the insured’s entire lifetime. It also builds cash value on a tax-differed basis, which you can take a loan from or withdraw in the future. The premiums and death benefits remain fixed, but one of the biggest hurdles of whole life is it is cost prohibitive. It costs 20 or more times when compared to a term policy.
Which One Is the Best?
For the majority of stay-at-home parents, term life insurance would be the best option mainly because it is affordable at almost any age, notably in the youngest years.
For instance, a 30-year-old woman can get a 20-year term coverage under $11 per month. The second reason to buy term is that child-bearing years don’t last forever, that baby will grow up, the mortgage on the house will eventually get paid in 20 years, so if I’m only trying to safeguard these affairs, a 20- or 30-year policy would be more than enough.
How Much Does It Cost to Buy Life Insurance on a Stay-At-Home Parent?
Term Life Insurance Sample Monthly Rates
20-Year Level Term Male
20-Year Level Term Female
No-Exam Sample Monthly Rates
20-Year No-Exam Male
20-Year No-Exam Female
Your job is to prepare for the unexpected. Life insurance can help you do just that. When you buy life insurance for yourself as a breadwinner, don’t forget to buy one for your husband or wife. After all, it takes two to tango.
Term life insurance is the preferred choice because it wouldn’t break your bank and will also give you peace of mind should the unexpected knocks at your door.
You can go ahead and use our form on the right-hand side and get instant life insurance rates, or you may call us at 866-326-3053 for personalized, unbiased quotes from 50+ top-rated life insurance companies.