When you think of life insurance, you might picture the sole breadwinner in a family buying coverage to provide for their loved ones in case something unexpected happens to them. But what about stay-at-home parents? They might not have a traditional income, but they play a crucial role in their family’s well-being and financial stability.
After all, just because someone isn’t being financially compensated for their labor doesn’t mean it doesn’t have value and chances are, if you were forced to pay someone for all the work a stay-at-home parent does, you might find that you yourself might need to get a second job!
This is why, in this article, we’ll discuss why life insurance is just as important for stay-at-home parents and how one should go about finding the best coverage possible.
Why stay-at-home parents need life insurance
Because stay-at-home parents provide essential services such as childcare, housekeeping, cooking, and more life insurance companies fully understand why losing a stay-at-home parent would create a significant financial hardship to a family above and beyond any personal losses.
For example, if something were to happen to a stay-at-home parent, the surviving family members would need to find a way to replace those services, which can be costly and time-consuming.
Additionally, the loss of a stay-at-home parent can also have a significant impact on the family’s finances. The surviving parent may need to take time off work to care for their children or pay for additional childcare expenses. Not to mention any expenses related to the funeral and other end-of-life costs which may or may not have accumulated.
How much life insurance do stay-at-home parents need?
The amount of life insurance needed for stay-at-home parents depends on several factors, such as family size, income, and living expenses. A good rule of thumb is to consider how much it would cost to replace the services provided by the stay-at-home parent, including the cost of childcare, housekeeping, and other essential tasks.
If the stay-at-home parent takes care of three children and the cost of full-time childcare is $1,500 per month, the family would need at least $18,000 per year in coverage just to cover the cost of childcare multiplied by the number of years this care would be needed. Additionally, you’ll want to consider any outstanding debts or mortgages that need to be paid off.
This of course would only provide a starting point to consider because adding additional costs of housekeeping, carpooling, cooking, etc. it’s easy to see how replacing a stay-at-home parent’s non-monetized labor can be REALLY expensive!
Types of life insurance policies for stay-at-home parents
Stay-at-home parents have various life insurance policies to choose from, with term life insurance and whole life insurance being the two most prevalent options. Now let’s briefly examine each of them so that you can have a general idea about how they work.
Term life insurance provides coverage for a specific period of time, usually ranging from 5 to 30 years. The policyholder pays a set premium amount for the duration of the term, and if they pass away during that time, their beneficiaries receive a death benefit payout. Term life insurance is also generally more affordable than whole life insurance and can be a suitable option for those who want to ensure financial protection for their family for a specific time period (such as until their children finish college or a mortgage is paid off).
Whole life insuance…
On the other hand, provides lifelong coverage as long as the policy remains active. Whole life insurance policies are typically more expensive than term life insurance, but they also come with the added benefit of building cash value over time. This means that a portion of the premium payments is invested, allowing the policy to accumulate a cash value that can be borrowed against or used to pay future premiums.
Now we’ll be the first to admit that our description of both term and whole life insurance policies is woefully inadequate to get a full understanding of the pros and cons of each policy, but for our purposes here in this article, we feel it’s enough to give you a general idea of what options may be available to you. This way, if you do decide to purchase a policy, you’ll at least know what “types” of life insurance policies you should be investigating further.
Applying for life insurance as a stay-at-home parent
Applying for life insurance as a stay-at-home parent is a similar process to that of any other individual seeking life insurance. The first step is to research different insurance providers and compare policies to find the one that best suits your needs and budget.
Once you’ve identified a policy you’re interested in, you’ll need to complete an application and provide information about your health, lifestyle, and any pre-existing medical conditions.
You may also need to undergo a medical exam, depending on the policy you choose and the insurance company’s requirements. Here at IBUSA, will usually explore any no-medical exam life insurance policy options first so that if this option is available, you won’t have to wait as long for an approval.
Where some applicants may run into trouble is…
When a stay-at-home “non-working spouse” decides to apply for a large life insurance policy. This is because most life insurance companies will use an applicant’s income combined with their current age to determine how much insurance they can qualify for. In situations like these, some insurance companies may have a limit regarding how much a stay-at-home parent can apply for. In some cases, this limit may also be tied to the amount of life insurance coverage the primary bread earned has on him or herself.
This is where working with an experienced life insurance agent who is familiar with these types of restrictions can be quite helpful.
So, to sum it up, it’s fair to say that both working spouses and stay-at-home parents can benefit from having life insurance coverage. For working spouses, life insurance can provide a safety net to protect their family’s financial future in the event of their unexpected death.
While for stay-at-home parents, life insurance can provide necessary financial support to help cover childcare, housekeeping, and other expenses that may arise if they were no longer there to manage the household.
This makes sense when you really think about it because, it takes a lot of work to run a happy and productive home, and while ½ of the equation may not take home a paycheck each and every month, that doesn’t mean they aren’t contributing financially to the household. It just means that they aren’t getting “paid” to do it! This leaves us to our final topic which is….
How much will my life insurance cost?
At this point, we’d love to give you an idea about how much your insurance will cost, but the truth is, the cost of life insurance can vary significantly based on several factors. Factors such as:
The younger you are when you purchase life insurance, the lower your premiums will be. This is because younger people are generally considered to be less risky to insure than older people. As you age, the cost of life insurance will typically increase.
Your health plays a significant role in determining the cost of your life insurance premiums. If you have a pre-existing medical condition, smoke, or have a history of health problems in your family, your premiums may be higher. On the other hand, if you’re in excellent health, you may be eligible for lower premiums.
The amount of coverage you need can impact the cost of your life insurance. Generally, the more coverage you need, the higher your premiums will be.
Type of life insurance policy chosen: Whole life insurance will cost more than term life insurance. And should you choose to purchase a term life insurance policy, the term length of your life insurance policy will also impact the cost of your premiums. The longer the term of your policy, the more you’ll pay in premiums.
Women typically pay lower premiums than men because they have a longer life expectancy and are considered to be less risky to insure.
The good news is that we can provide you with a fairly accurate estimate of your potential insurance costs within just a few minutes of speaking with you on the phone. So, if you are considering purchasing a life insurance policy give us a call and let us show you what we can do for you!