Insurance protects your assets when something unexpected happens — a wreck, a fire, an accident at work, or even your own death.
While you shouldn’t buy every kind of insurance, there are some policies you definitely need.
Life insurance falls into this must-have category. It protects your family’s finances in case you die where they no longer have your income.
But what about life insurance for a stay at home partner who doesn’t earn an income?
Life Insurance for Stay At Home Parents: Protection to Consider
Since a stay at home partner doesn’t typically earn much income, it can be tempting to ease the family budget a little by declining life insurance for that partner.
The thinking goes like this: A stay at home partner’s death — while tragic and life-changing for the entire family — would not affect the family budget very much, so there’s no reason to buy life insurance coverage to replace income.
However, as stay at home parents already know, it could cost tens of thousands of dollars, and maybe more, each year to replace the stay at home partner’s value.
The Value of Staying Home
The partner who stays home often takes care of obligations the working parent or partner may not be able to do.
Things like:
- Childcare
- Meal preparation
- Shopping
- Cleaning
- Running errands
- Scheduling appointments
- Financial planning (in many families)
- Decorating
- Home improvement projects
- Home organization
- Filing insurance claims (in many families)
- Bill paying (in many families)
- Attending parent-teacher conferences, recitals, athletic events
- And much, much more.
We don’t always consider the monetary value a stay at home partner represents. It’s easy to take these jobs for granted, both financially and in the amount of time they require.
How Life Insurance for a Stay at Home Partner Really Helps
If the stay at home parent died unexpectedly, hiring someone to handle these jobs would cost a significant amount of money each year.
Of course, you might not hire someone to do all of a stay at home partner’s duties. The surviving partner could take on some of the jobs or have other family members nearby who can help.
But even this strategy has a financial cost because spending more time at home could prevent the surviving parent from working as much, leading directly to a loss of income.
And, unless you’ve experienced the death of a spouse, there’s no way to calculate the emotional devastation you’d experience. The surviving partner may need some time away from work to grieve and help the rest of the family deal with the loss.
Life insurance on a stay at home partner can help protect your family from these financial strains.
How to Calculate the Coverage Amount for a Stay at Home Partner
Any life insurance policy, whether you buy term or whole, includes a coverage amount. This is the amount the policy’s beneficiary would receive if the policyholder died.
Someone who earns an income should consider getting enough coverage to replace that income for five to ten years while also addressing future expenses such as college, cars, and paying off the mortgage.
When you’re the breadwinner, you can add up these needs and get a pretty good idea how much life insurance coverage to buy to help protect your family.
For a stay at home partner, however, determining a coverage amount can be harder.
Just how do you put a dollar sign on the value of staying home?
A What-if Discussion Can Get You Started
Most of us find it unpleasant to imagine life without our significant other.
But having such discussions now can make life easier if the worst happens and the surviving partner has to rebuild a new life.
I recommend sitting down and thinking through how life would look, especially the first few years, after the stay at home partner’s death.
Important questions to consider include:
- Would the surviving partner continue to work away from home? If so, you won’t need to worry so much about income replacement but more about home management.
- Could family help take care of the children or would you need to pay for childcare? If family or friends can’t help, determine how much you’d need to pay for childcare. It’s remarkably expensive!
- Would the surviving partner want to move? It can be hard to keep living in a house with so many memories, but moving is costly.
- Would the surviving partner need to hire a full-time home manager? If you live far away from family members and don’t imagine you’d move, you may need to consider hiring someone to handle day-to-day details of life.
- What kind of funeral/burial would the stay at home partner want? Depending on religious beliefs and preferences, you could spend up to $10,000 on burial expenses.
You don’t have to accurately predict exactly how you’d feel at such a horrible time. Just getting a pretty good idea can help you decide on a life insurance coverage amount.
The great thing about life insurance coverage is the beneficiary can spend the benefit as he or she sees fit.
Even if life changed and you didn’t need as much money as you’d thought, the beneficiary can use the life insurance payout to create a more secure future.
Consider Alternative Employment Income, Too
As the economy continues to evolve, many stay at home partners also earn income while simultaneously running a household.
Work-from-home jobs, freelance jobs, side hustles — you can find many ways to earn a living without spending the day in an office or on a factory floor.
We often discount these sources of income since they don’t usually rival the household’s primary income source. But some stay at home partners earn enough to buy groceries or pay for the annual vacation.
When calculating life insurance needs for a stay at home partner, remember to account for this value, too.
Whole vs. Term, Term Lengths, and Other Decisions
Life insurance comes in many different types. For most people in their 40s and younger, a term policy should work just fine.
A term policy, unlike a whole policy, lasts for a specific amount of time, then expires. Terms usually range from 10 years to 30 years.
Since they do not last the rest of your life, term policies usually cost less, and they also allow for some flexibility.
For example, if you have young children who depend on you, you’ll need a larger coverage amount than someone whose kids have graduated from college.
A 20-year term policy could give you a large amount of coverage now and then expire in 20 years when your children may not need you as much.
Whole life policies can be great, too, especially if you’re a little older. They last the remainder of your life (or until you stop paying the monthly premiums). Whole life policies include an added-cash value which make them more complex and costly.
Life insurance, especially a whole policy, should be part of your comprehensive financial plan.
Will You Need a Medical Exam?
While you can buy life insurance without getting a medical exam, taking the time to get the exam can save you a lot of money.
In most cases, no-exam life insurance costs a lot more and offers less coverage because insurance underwriters do not know the risk they’re taking with your policy.
When they don’t know the risk, underwriters tend to estimate in their favor and not yours.
How Do You Find the Best Rates?
You can do a lot to keep your insurance rates low, especially with a term policy:
- Opt for a shorter term: The longer the duration, the higher your monthly premiums. Get the term you need, but don’t buy a term that’s longer than necessary.
- Get your coverage amount just right: More coverage costs more money. Again, get the coverage you need but avoid the temptation to max out your eligibility.
- Quit smoking and improve your health: Tobacco will increase your premiums dramatically. Get yourself tobacco-free before applying for insurance if possible. Other health issues, such as high blood pressure and obesity, will raise your rates.
- Shop around: There are a lot of great life insurance companies out there. Shop around and get quotes as you compare policies and premiums.
Insurance Policies to Avoid
When comparing policies, be sure to check the insurance company’s ratings from independent agencies such as Moody’s and A.M. Best.
These ratings, which resemble the grades you’d earn in school, can tell you a lot about an insurer’s financial stability. An insurance company with a B or lower rating may not be in a position to pay your claim when needed.
It’s also important to distinguish an actual life insurance policy from similar products. Mortgage life insurance, for example, would pay off your mortgage if you died unexpectedly, but it wouldn’t help your family in any other way.
No-exam or burial life insurance policies can be very beneficial for someone who’s older or in poor health. But you’ll spend too much and get too little coverage in return if you’re young and healthy, which is often the case for stay at home partners.
Life Insurance is Another Way to Plan for the Future
Some of life’s scariest questions begin with “What if…?”
- What if you died and your partner needed to build a new life?
- How would he or she afford it?
- What if your partner needed to take a year off work to grieve and help your children grieve?
- How would she or he survive without an income?
- What if you don’t have an extended family who can help?
- How would your partner handle everything alone?
No, life insurance coverage won’t take away the pain of loss, but at least it could give your partner more flexibility and a wider variety of choices as he or she rebuilds your family’s life.
For a stay at home parent who is accustomed to planning for the unexpected and making contingency plans, shopping for the right life insurance policy will feel like a natural fit.
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Pam says
Miranda,
I used to sell life insurance, so I do understand the importance of having it for both parents. One thing I know is that you need life insurance for a stay at home parent because if they where to die, then it would make going back to work anytime soon very difficult for the other parent.
Pam
Kris says
I always thought life insurance was to cover wages, but covering expenses could also be considered. I just wouldn’t buy too much, and carefully consider what the expenses would be so you get just enough.
Derek - Freeat33 says
Just don’t allow “Insurance” to be replaced with “Jackpot”. Sometimes people insure so much because they think it will take a million dollars to replace them. My wife needs $600 / wk to feed my family of five. If I pass I imagine those costs would reduce as I eat a lot and also spend. If I insure for $700,000 she would have too much.
Ryan Guina says
Derek, There is more to deciding how much insurance to buy than just looking at immediate financial needs. It’s a good idea to look at how much the other party is contributing to running the household in terms of financial contributions, how much work they do around the house or with the children, etc. It’s also a good idea to anticipate future costs. Even if your home is paid off, it’s a good idea to plan for other large expenses such as college tuition, car repairs/replacement, etc.
Marie at FamilyMoneyValues says
I agree with the need, but wouldn’t overbuy on the protection. Definitely cover the cost of the things done by the stay at home IF the surviving partner wouldn’t be able to take them on – but if the surviving partner is able to keep up the cleaning, for example, there is no reason to buy enough insurance to hire a housecleaner for years.
Kevin @ Ask For Benefits says
A stay at home parent is far more likely to encounter a disability than die early. Life insurance is important for the reasons stated in the article, but if a parent is unable to care for the family because of a non fatal accident or illness the impact can be even greater as there may be ongoing medical expenses.
But you can’t buy disability insurance for someone who is not working out of the home. So what do you do? There are supplemental policies that the other spouse can buy at work that covers accidents and illnesses. If another child is a possibility buying hospital indemnity makes a lot of sense.