When considering the purchase of life insurance, it is easy to overlook the value of a stay-at-home parent because they provide little, if any, revenue to the family budget. If you look at income generation, you might question why a stay-at-home parent needs the protection of life insurance.
However, do not fall into that trap. Stay-at-home parents contribute so much to a family that it is hard to calculate their true worth. You should understand that life insurance is important, and why it makes sense to insure a stay-at-home parent.
- Is Life Insurance Necessary?
- Why Do You Need Life Insurance?
- When Should You Buy Life Insurance?
- How Much Life Insurance Do You Need?
- Reasons Why Stay at Home Parents Need Life Insurance
- What Kind of Life Insurance Should I Buy?
- Where Should You Buy Life Insurance?
Is Life Insurance Necessary?
Yes! There’s no doubt about it. Whether you’re a stay-at-home mom or stay-at-home dad, the work you do at home will need to be done by someone else if something should happen to you. And, that’s going to cost money—a lot of money.
In 2019, the estimated median cost of the work done by a stay-at-home mom was $178,201. This finding was based on the real-market value of the jobs a stay-at-home mom performed at the time the Salary.com study was done. And, this was a 9.6% ($15,620) increase over the cost in 2018. That’s almost a 10% increase — in just one year!
Why Do You Need Life Insurance?
If you’re a stay-at-home parent, you already know all the jobs you do on a daily basis. How costly would it be to hire someone to take care of your children and do everything else you do around your home each day?
Salary.com identified the kinds of paid workers and professionals required to replace all the different jobs and roles a stay-at-home parent performs. The list is quite lengthy, but here are some of the most important roles:
- Daycare provider/Babysitter: An Ohio television station reported in-home daycare cost about $10,000 a year (about the cost of college at a state school).
- Cleaning services: The average cost to clean a home is about $167. To have someone clean every week would cost more than $8,600 a year.
Just these two activities will cost you nearly $20,000 a year. This does not include meals, which you will likely spend more on take-out or eating out. So, it’s easy to see how quickly the costs would add up to replace a stay-at-home parent. This is why stay-at-home parents need life insurance.
When Should You Buy Life Insurance?
The best time to buy life insurance is now. Life insurance premiums and rates increase as a person gets older. The earlier you purchase a policy, the better your rates will be.
In addition, the risk of developing a health condition increases as you get older. Pre-existing health conditions result in higher premiums — or an insurance company might deny your life insurance application altogether.
To protect yourself from this potential scenario, get life insurance now while you still can. When you put off the purchase of life insurance, it becomes more expensive. Delaying the decision leads to a higher rate for the next 20 to 30 years, depending upon the length of your term.
How Much Life Insurance Do You Need?
The amount of life insurance you need as a stay-at-home parent is unique to you and your family’s situation.
Although these conversations can be difficult to have, it’s important to discuss and decide with your spouse how much life insurance you both agree is needed in the unlikely event of the stay-at-home parent’s unexpected death.
Important issues to discuss with your spouse or significant other include:
- Funeral and burial expenses
- At-home job/role replacement expenses (e.g.childcare, grocery shopping & meal preparation, housekeeping, laundry, etc.)
- Debt repayment
- How much time the surviving spouse/partner will need off work
- What financial resources the surviving spouse/partner will have access to while they’re off work
- College education costs for children
Ensuring your family has the appropriate life insurance coverage will give both you and your partner peace of mind and ensure your family is taken care of should the worst happen.
Reasons Why Stay-at-Home Parents Need Life Insurance
As noted earlier, there are many financial considerations to plan for if a stay-at-home parent were to die unexpectedly. Let’s look at some of these in more detail.
1. Paying for Funeral Expenses
In 2020, the average funeral with burial costs $6,000 to $12,000.
While these amounts cover the basic costs associated with a funeral and burial or cremation, this still does not include other expenses such as flowers, a cemetery site, or a marker. For example, the cost of a grave plot can vary widely from $1,000 to $4,000 and is even higher in some larger cities.
Funeral expenses are not something most people want to discuss, especially when they’re young and have children. However, it’s best to have this discussion and make a plan so you have peace of mind that this issue is taken care of should the need arise.
2. Paying for At-Home Job/Role Replacement Expenses
As noted earlier, the yearly dollar value of a stay-at-home parent’s work was approximately $178,201 in 2019. The surviving parent is now left with having to pay for childcare and transportation, housekeeping and property maintenance, grocery shopping and meal preparation.
These are just a few of the most common expenses a surviving spouse or partner faces from an exhaustive list of expenses.
3. Paying for Surviving Children’s Physical Needs
Besides the expense of paying someone to perform the jobs and roles that the deceased stay-at-home parent once performed, there are many other expenses that the surviving parent will have to shoulder alone. Some of these include:
- Medical and dental costs
- Education costs
- Extracurricular activity expenses (lessons, equipment, travel/accommodation/meals, private coaching or instruction)
The most recent figures from the U.S. Department of Agriculture (USDA) show that in 2015, it cost $12,980/year per child to raise children in a middle-income ($59,200-$107,400) family comprised of two children and a married couple.
And this doesn’t include the cost of a college education.
4. Provide Your Children with a College Education
Newspapers write a lot about college tuition increases. College affordability dominates discussion among school administrators.
Consider these latest statistics: For the 2019-2020 school year, the average cost of tuition to attend an in-state public college was $10,116/year. A private college costs $36,801/year.
With the costs of college education increasing 3%-4% every year, students and parents are finding it more and more difficult to meet these expenses.
Because of the high cost, you need to include college education costs in your discussions about life insurance coverage amounts.
5. Paying Off Debt
While the surviving spouse isn’t usually required to pay the debts of a deceased spouse (unless they co-signed for a loan or they’re a joint account holder on a credit card), there are some exceptions.
- One of the biggest issues the surviving spouse with children would face is an outstanding mortgage on the family home. If the mortgage was issued in joint names (which is quite common), the surviving spouse would still be responsible for paying the mortgage. Contact your mortgage lender to find out if you have mortgage life insurance. This life is insurance pays the remaining balance of your mortgage if the mortgagor dies.
- If a surviving spouse lives in a community property state, they’re required by law to pay the deceased spouse’s debts that were acquired during the time the couple was married.
Laws vary by state regarding this requirement so be sure to discuss this with a certified financial advisor when you’re trying to determine how much life insurance the stay-at-home parent needs
Related Post: How To Pay Off Credit Card Debt
Bonus Reason: Provide Peace of Mind
A death can immediately place your family in a financial bind. So, no matter how you slice it, life insurance provides peace of mind.
The money will never make the grief easier, but it ensures your loved ones will be taken care of financially. When your family finds itself emotionally spent after a death, a life insurance policy with sufficient coverage softens the financial blow.
What Kind of Life Insurance Should I Buy?
There are two basic kinds of life insurance: Term and permanent.
As the name implies, term life insurance provides a death benefit for a person over a specific term: Usually 5 to 30 years. When the term expires, so, too, does the death benefit. To ensure coverage continues, you will need to apply for a new policy.
Permanent life insurance covers people for their entire lives, and this kind of policy includes a savings or investment component to it
Dave Ramsey makes the argument everyone should buy term life insurance. You will pay less for a term life insurance policy than one that builds a cash value. He believes in keeping your insurance and your investments separate.
Where Should You Buy Life Insurance?
You want to buy from a reputable company you can trust. Good rates, great customer service and ease of applying should factor into your decision. For these reasons and more, we like Bestow, an online company that offers term life insurance from trusted partners.
Why Choose Bestow
If you ever walked into an insurance agency to apply for a policy (whether auto, home, health or life) then you know about the mountains of paperwork involved in applying. With Bestow, you can get a quote in seconds and get covered in mere minutes. What’s more, you can apply from the comfort of your home.
Bestow makes it simple to apply for insurance.
- Bestow offers term life policies of 2, 10 or 20 years
- Simply choose a coverage amount between $50,000 and $1 million.
- Premiums start at just $5 a month, which we think qualifies as affordable.
Best of all, Bestow customers rate the company highly: 95% rate Bestow as excellent and 3% rate it as good. So, a whopping 98% of customers rate Bestow as excellent or good.
Head over to Bestow to get a quote in seconds and coverage in minutes so you and your family can have the financial security and peace of mind you deserve.
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Leona Werezak is a freelance writer who enjoys writing about personal finance and health & wellness. When she isn’t writing or wearing her nursing hat, she’s coming up with new business ideas. She also freelances with Wooster Media Group LLC.