One of the main reasons for purchase life insurance is to help replace income that your family depends upon, in the event of your death. Being a stay-at-home parent is more than a full-time job that does not come with an actual pay cheque. So, do you still need to have life insurance coverage? The answer is, yes! Often people overlook the financial support that a stay-at-home parent provides. A simple way to think about it is, if you had to replace the things the stay-at-home parent does, how much would it cost you?
Why do Stay-at-Home parents need life insurance?
Stay-at-home parents have a significant financial value to their family. They provide invaluable services that would be costly to replace. When determining the family’s life insurance needs their contributions to the household need to be considered. Such as,
- Childcare
- Household duties (cooking, cleaning, laundry, grocery shopping, helping children with homework)
- Home management (property and pool maintenance, driving children to extracurriculars, managing the budget, paying the bills)
The surviving spouse may not be able to take on all these responsibilities and may need to pay for numerous additional services to keep the household running.
The financial safety net that a life insurance policy for a stay-at-home parent provides, by covering the cost of their numerous roles in the home, can also help to protect the breadwinner’s earning potential by affording them the ability to continue to do their job (ie. travel for business, work the hours required etc). Also, it can let the surviving spouse take time off work to grieve and be with the children and to make career decisions that he/she feels are in the children’s best interest (ie. change jobs to be home with the kids more often).
Not only will the life insurance benefit provide funds to cover the costs of childcare and services that are essential for household function, but it can also help cover final expenses and other bills.
What are the benefits of having it?
- Protection of the family’s financial future – The life insurance benefit will help protect your family from the financial hardships that can be associated with the passing of a stay-at-home parent. The benefit can help alleviate financial stresses such as the cost to replace the services they provide within the home, funeral expenses and possibly other medical bills and expenses. This can help to maintain the family’s standard of living they are accustomed to.
- Provide for the children’s future – Life insurance can help to ensure that your children are provided for in the event of your death. The death benefit can be used for their educational expenses or other needs.
- Peace of mind – Having insurance coverage in place can help to give you peace of mind, knowing that if the worst were to happen to you, that your family would be taken care of, and they wouldn’t have to face financial hardship due to your unexpected passing.
How much life insurance is needed for a Stay-at-Home parent?
The amount of life insurance coverage a stay-at-home parent should have will vary. It depends upon several factors. A qualified financial advisor or life insurance advisor can help you determine the amount of coverage to help protect your family’s future.
Here are a few important things that you should consider when trying to calculate the amount of life insurance coverage that you need.
- What is your family’s budget?
- What are the family’s financial needs? (daily living expenses, outstanding debt, future expected expenses)
- What is the cost of replacing the services of the stay-at-home parent? Who will take on specific household duties? (an insurance advisor or financial advisor can help you calculate the value of the services provided by the stay-at-home parent)
- Family size. How many children do you have? (the larger the number of children, the bigger the life insurance policy the family should have because childcare costs will be higher)
- Time period in which your family would need coverage (ie. number of years until the children are grown and out of the house or finished post-secondary education)
- Career plans. Are you planning on returning to work? (what will your income be if you return to a paying job)
What type of life insurance is best for Stay-at-Home parents?
There are several different types of life insurance products available that are suitable for stay-at-home parents. It depends upon the individual’s family needs, budget, preferences, and goals whether a term, permanent or combination of both is appropriate.
Term life insurance is very affordable coverage that can allow families to get the protection they need for the timeframe they need it. It enables you to choose a specific term (ie. 10, 15, 20 or 30 years) that could cover the period of time until all your children have graduated high school or college/university.
Permanent life insurance provides coverage for the policyholder’s entire life. These policies, whole life and universal life, cost more than term life insurance products. The higher cost of permanent life insurance products is often a deterrent for younger individuals and families. These permanent life products are often better suited for higher-income families who have covered other financial planning bases such as maxing out retirement saving and saving for children’s post-secondary education and have an emergency fund.
Many term life insurance policies include a conversion rider that give you the option to convert some of or all of the term life policy to a whole life insurance policy. It is also important to know that term and permanent life products can be combined to provide more affordable and suitable coverage solutions. Every family situation is unique, so it is important to work with a licensed advisor to help you find a solution that best fits your needs and budget.
Having life insurance coverage for the stay-at-home parent is just as important as it is for the income-earning parent. The loss of a spouse and a parent is stressful enough for the whole family. Having a life insurance policy in place for the stay-at-home parent would provide a peace of mind that your family’s financial future is protected and allow them to focus on healing and moving forward during that difficult time.