Do Stay-at-Home-Parents Need Life Insurance?

Life insurance offers important financial protection for families of all shapes and sizes, including stay-at-home parents.

A stay-at-home parent's financial contribution to the family is often overlooked and undervalued. While a stay-at-home mom or dad might not be increasing the family bank account, their role helps to save thousands of dollars in expenses each year, and are therefore a critical component to the financial wellbeing of the family.

The average national cost of daycare is now pegged at $10,000 per year per child, a figure which is much higher in some provinces or certain cities. Given this exorbitant cost, for some families, it may not make financial sense for both parents to work outside of the home. Despite the absence of outside income, a family should not overlook the need for that stay-at-home parent to be protected by a life insurance policy.

The purpose of life insurance is to replace the income of the deceased so that the family can continue to function without financial hardship. Should the stay-at-home parent pass, their contribution to the home and the expenses of running it will need to be replaced. Replacing the contributions of a stay-at-home parent - think childcare, transportation, housekeeping, and meal preparation, to name a few - can be a significant burden, one that can be alleviated by life insurance. A life insurance payout can provide the money needed to cover many of the responsibilities once filled by the stay-at-home parent.

Life Insurance for Stay-at-Home Parents

A stay-at-home parent wears many hats. He or she usually looks after the children, runs the household, handles transportation, acts as a tutor or coach, and so on. If they were to pass, would the surviving spouse be able to immediately step into their shoes? This might require working fewer hours, which can strain the family's finances.

Life insurance could help pay for childcare, or perhaps domestic help to allow the surviving parent to continue working full-time. Life insurance might also make it possible for them to reduce their working hours and spend more time at home. While life will never go back to normal, life insurance can keep your family going, even under the worst of circumstances.

Insuring only the working parent is not enough; consider this as only providing your family with half of the protection they need. The death of any parent has a significant impact on the family, both emotionally and financially. Without coverage for a stay-at-home parent, you wouldn't have the financial support to help fill the void left behind. According to salary.ca, the average value of this void - calculated by adding up the many jobs of a stay-at-home-parent - is over $160,000 (US) annually. Without a financial safety net, following the passing of this parent, the family might need to take more extreme measures such as moving to a more affordable area, uprooting everyone at a time when stability should be a priority.

How Much Life Insurance Does a Stay-at-Home Parent Need?

Because every family is different, there is no one-size-fits-all solution to this question. Consider what it might cost you to have someone look after your home and children until they are out of the house or are old enough to contribute to the functioning of the household. Factor in childcare expenses, transportation to and from school, someone to help with meal preparation, cleaning, and laundry. Will your children need a tutor? Therapy after the loss of a parent? Without life insurance, these expenses could be devastating.

Choosing the right amount of life insurance coverage for a stay-at-home parent should be done thoughtfully. Life insurance costs less while you are young and healthy, another reason to obtain it now, instead of when you are ready to return to the workforce. Carefully consider your needs, both now and in the future. Factor in plans for additional children, the current age of your children, the primary breadwinner's career path, and your family's lifestyle, values, and goals. A 10-20-year term life insurance policy will likely offer a sufficient coverage period while your children are dependent upon the support of the stay-at-home parent. The amount of coverage will depend on the cost of living in your area and your family's specific needs. Gather quotes from multiple providers and choose a policy that includes the features and coverage that bring you the most peace of mind.

Stay-at-home-parents play an invaluable role, saving the family thousands of dollars each year in expenses and time; their value should be both recognized and protected. While no one can take the place of a stay-at-home parent, you can replace their financial contribution with a life insurance plan, should the unexpected happen.