Life Insurance for Stay at Home Parents: How Much Do You Need?
In the case of families where one parent is working and the other stays at home to hold down the fort, there’s a common misconception that only the parent who is working has financial worth and should be covered by life insurance.
The truth is, both the working parent and the stay-at-home parent have significant financial worth, and thus it’s always best to make sure both parents are covered. Here’s why it’s important to get life insurance even as a stay-at-home parent, and how much you should take out.
Why should a stay-at-home parent get life insurance?
Society tends to undervalue stay-at-home parents and wrongly assume they don’t contribute to family finances. However, the truth is, having someone at home to cover all bases saves tens of thousands on services every month that would be otherwise outsourced to keep a household running.
According to the annual Mum Salary Survey conducted by Salary.com, stay-at-home parents wear many hats comparable to a gamut of paid jobs, ranging from but not limited to:
- Academic adviser
- Chief Executive Officer
- Day Care Centre Teacher
- Event Planner
- Executive Housekeeper
- Logistics Analyst
- Maintenance Supervisor
- Network Administrator
- Public School Teacher
- Work/Life Program Manager
In 2016’s computation, this work would amount to at least 65,500 AUD a month. That’s not counting overtime, since the duties of stay-at-home parents aren’t limited to a 9AM-5PM window. These round-the-clock jobs would theoretically rake in overtime pay of 128,100 AUD. This brings the total worth of a stay-at-home parent’s work every month to 194,900 USD. Imagine suddenly having to shell out that much every month to keep the house afloat by hiring housekeeping, driving, cooking, cleaning, shopping, tutoring and other services!
If this is a staggering amount for one month, consider how expensive it would be annually as the remaining spouse raises the family by themselves.
Finally, the death of a spouse will result in other immediate expenses – medical bills, funeral expenses, and taxes – all of which will be heaped on top of the trauma and emotional turmoil of losing a family member.
Taking out life cover for a stay-at-home parent means the working parent will receive a death benefit that will defray these immediate and long-term costs. They will not be left scrambling to make up expenses to keep the household running in the midst of grieving and keeping the family together. Purchasing life cover for the stay-at-home parent is therefore, a sensible, responsible idea.
How much life insurance will a stay-at-home parent need?
To get a general idea of how much life insurance to take out, research how much it would cost in your area to replace the amount and quality of work the stay-at-home parent does at home every month.
Multiply this cost by 12 to get the annual cost of the work done by the stay-at-home-parent. The annual cost will then be multiplied by the number of years it will take before the youngest child graduates from college and leaves the nest. This will be more or less the ideal amount of coverage you should aim for when getting life insurance for the stay-at-home parent.
Of course, the amount you will actually decide to take out will also depend on certain factors such as location, number of current dependents (and if you expect to have more), family’s income, and debt (mortgages, credit card debt and car payments, for example). If the working parent will be shouldering all the costs, consider as well their current salary and job security.
Bring up all your family’s concerns with your life insurance adviser when you decide to take out life insurance for the stay-at-home parent.
How to get life insurance for a stay-at-home parent
There’s no placing monetary value on your worth as a parent, but life insurance is simply there to assist your family in coping with your loss by replacing the work you contribute as unobtrusively as possible.
No one wants to think about dying when the centre of their world is their growing family, but you can make it gentler on your loved ones in the unexpected event of your loss by preparing for it in advance. You may not necessarily need the most expensive policy available, but it’s important that you have a safeguard in place to ensure that your spouse and dependants will be able to carry on in your absence.