A life insurance policy for a stay-at-home mom can help offset financial hardships
Oftentimes, stay-at-home moms assume that just because they don’t bring in a paycheck, they should not get a life insurance policy. However, just because they aren’t getting paid for the work they do doesn’t mean it doesn’t hold value. For many families, the loss of a parent—no matter their employment status—can put them in a hard spot financially. How will they pay for childcare? How will they afford their mortgage with a shift in their financial responsibilities? Because of this, stay-at-home moms should absolutely consider a life insurance policy to support their families in case they pass away unexpectedly. When thinking about getting a life insurance policy as a stay-at-home mom, you need to consider what value you bring to the table and what type of support your family will need if you were no longer there. That will help you determine what type of life insurance you need—possibly an affordable term life insurance policy or a longer-term whole life insurance policy—and how much coverage you should have.
The Value of a Stay-at-Home Mom
Though stay-at-home moms may not get a weekly paycheck, their responsibilities bring a ton of value
It’s estimated that if stay-at-home parents were to be paid for all of the work they do, they would earn an annual salary of around $180,000. Because stay-at-home parents act as a nanny, a housekeeper, a private chef, and countless other jobs, it would be foolish to say that they don’t bring value to the table just because they don’t actually get a paycheck. In fact, the cost of providing for a family is so high that it oftentimes makes much more financial sense to have one parent stay home and care for their children.
In an instance where a stay-at-home parent passes away, what is the cost to raise the family now with just one parent? To determine that, let’s take a look at the cost of the primary responsibilities of a stay-at-home mom.
1. Childcare
The price of childcare is shockingly high, and that is not going to change any time soon. The amount of money you can expect to pay for childcare depends on where you live, what type of childcare you need, how many children you have, and how old your children are. With that being said, in 2020, the average annual cost of childcare was a little over $10,000. Each year, that cost is getting higher and higher.
To put this into perspective, let’s look at the average weekly cost of childcare by type for one child:
- Child care center – around $220 per week
- Nanny or babysitter – around $690 per week
- Family care – around $220 per week
- After school care – around $260 per week
As your children age, you can expect the cost of childcare to decline. However, in the years that it is still necessary, your partner will have to find a way to offset that cost.
2. Housekeeping
Stay-at-home moms aren’t just responsible for the care of their children. More often than not, they have to take care of the house as well. That means cleaning up after the kids, doing the dishes, and making sure all of the laundry is done. Again, if a stay-at-home mom were to pass away prematurely, the housekeeping responsibilities are just one more thing that falls upon the remaining spouse.
While it may seem a bit extreme to hire a housekeeper upon the passing of a stay-at-home parent, it could be a real possibility if the remaining parent needs to work a lot more in order to provide for the family. For a weekly housekeeping service, you can expect to pay anywhere from $75-250 per visit—depending on how big your house is and how much needs to be done.
What to Consider When Getting a Life Insurance Policy
Take into account the expenses your family will have if you pass away prematurely
Planning for a time that you are no longer around can feel very overwhelming. You want to make sure that your family is taken care of as best as possible in the event that you pass away prematurely. So, when you start to think about getting a life insurance policy to take care of your family, there are a few aspects of your life you want to weigh to determine if you need a policy or not. Of those, you will want to think of your children, your lifestyle, your employment, and any final expenses that your family may have to assume after your death.
1. Consider Your Children
For stay-at-home moms, their children are often their biggest determining factors when considering a life insurance policy. Beyond their spouses, they want to make sure that their kids will be taken care of even if they aren’t around anymore. Because of that, there are a few things about your children you should consider when thinking about getting a life insurance policy.
- How many children you have – Generally speaking, two children are more expensive than just one child. For larger families that depend on their stay-at-home mom for the care of their children, a life insurance policy can ease the new cost of care.
- The age of your children – For parents with young children, life insurance may be a higher priority than for parents with teen children. Parents of teens expect that in the very near future, their children will be financially independent. As for young children, though, parents should think about how many years their children will depend on them and how much it will cost to raise them until they are old enough to become financially independent.
- College funds and other support – Many parents have a goal of setting aside a bit of money to help their children pay for college. Beyond just college, parents may want to set aside money for a wedding or downpayment on a house for their children. Stay-at-home moms may want to consider a life insurance policy if they would like to help their children in this way down the line.
2. Family Lifestyle
Once someone is used to a certain lifestyle, it can be hard to change that. But, with the loss of a parent in the family, that lifestyle is in jeopardy. Now, instead of two parents supporting a family, all of that responsibility falls onto one parent. When thinking about a life insurance policy, think of what your family’s lifestyle would look like without you there. Would you want to have a live-in nanny? Would any of your extended family members be able to help care for your kids? Would your spouse have to make too many changes in order to maintain your current lifestyle?
3. Employment Status
A stay-at-home mom may only plan on staying home until their children are old enough to go to school. Even then, many parents may only work part-time so they can still take care of their kids after school and keep up with the household. No matter if you plan on going back full-time or staying at home long-term (or anything in between), you should consider your financial contribution to your family. If you have a high earning potential that your family may rely upon down the line, you may want to consider a larger policy.
4. Final Expenses
Final life expenses, like funeral costs, can put families into financial hardships. In the United States, funerals, on average, cost between $7,000-$9,000. An important consideration for life insurance is whether or not your family can afford that cost. Beyond just a funeral, other expenses you may want to think about might be any outstanding debt. This could be your mortgage, student loans, and credit cards. As your debt now fully passes onto your family, consider how easily they will be able to pay that off.
Types of Life Insurance for Stay-at-Home Moms
Term and whole life insurance policies are typically the best options for stay-at-home parents
If you have determined that a life insurance policy is the right move for you, you will next want to consider the type of life insurance you get. Generally speaking, people opt for one of two options: term life insurance and whole life insurance. A third insurance option is TPD insurance, where the insurance would pay a lump sum if you become totally and permanently disabled because of illness or injury. The claim process can be both complicated and daunting, but thankfully, claims for TPD insurance with Curo are handled in an efficient manner, allowing you to focus on your health. Which is best for you will depend on your own needs, how much coverage you need, and how much you can afford to pay. More often than not, term life insurance is the more affordable option, and that’s why many young parents opt for that as opposed to whole life insurance. Whole life insurance, on the other hand, provides more than just a death benefit. Let’s take a look at both so you can determine which will work best for you.
1. Term Life Insurance
Term life insurance is a type of death benefit that covers a policyholder for a specified period of time—typically 10, 15, 20, or 30 years. With a term life insurance policy, the insurance carrier will determine the payout amount, or the total coverage, by getting to know more about your particular situation. Insurance carriers consider your age, your health, and even things like your driving record. Oftentimes, you will have to undergo a medical exam.
Term life insurance policies guarantee the payout of the death benefit if the policyholder does die within the coverage timeframe. So, for example, if someone had a $150,000 term life insurance policy for 15 years and die within the 15 years that the policy is active, the named beneficiary would be paid that guaranteed amount of $150,000. More often than not, the payout amount is not taxable, so the payout can be used to pay for funeral costs or to support families after their loss. Keep in mind, though, if the policyholder does not pass away during the term, there is no payout.
More often than not, term life insurance is the most affordable life insurance policy you can find. This is because it only covers the policyholder over a specified period of time and only pays out the death benefit. Because the price and coverage for term life insurance is determined by age and health, young, healthy parents can get a great amount of coverage for a low cost. Especially for stay-at-home moms with young kids, a term life insurance plan can provide a cushion for their families until their kids grow up and can start providing for themselves. For stay-at-home moms looking for an affordable life insurance policy that will help support their families in the event they pass away prematurely, term life insurance is normally the best option.
2. Whole Life Insurance
As opposed to the policy timeframe of term life insurance, whole life insurance, which is a type of permanent life insurance, covers the policyholder for their entire life. With whole life insurance, the policyholder will have a death benefit and a cash value associated with their policy. As you make payments for your whole life insurance policy, it accrues interest at a fixed rate. As the cash value increases, the policyholder can request to withdraw funds or borrow a loan against their policy.
Whole life insurance policies tend to be much higher than term life insurance policies because it covers the policyholder for their entire life and provides more than just a death benefit. In most cases, stay-at-home moms find this price to be a bit high for how much coverage they really need. On the other hand, high-income families who have already saved for their children’s college fund, invested in their retirement savings to the max, and are generally financially secure otherwise may find that a whole life insurance policy works for them.
How to Determine How Much Coverage You Need
Use popular formulas to determine how much life insurance coverage you should get
How much coverage you need truly depends on your own unique circumstances. You will want to take into consideration how much you contribute to your household and how much support your family will need without you there. To help you get started, there are a few formulas you can use to help you decide how much life insurance coverage you need.
One of the most popular ways to determine coverage needs is the 10 times formula. With this, you would multiply your income by 10. As a stay-at-home mom, you may not necessarily have an income to use. Instead, you may want to consider the yearly cost of raising your family and consider the potential costs your family would have to pay in your absence.
Working off of the 10 times formula, another formula takes into consideration 10 times your salary and how much you would need to save for each child for college. So, in this case, you would take that same outcome from the last formula and add $100,000 to that to help contribute to your child’s college expenses.
Lastly, you may want to consider using the DIME formula. The DIME method breaks down as such:
- D – Debt – The total of all your current debt.
- I – Income – The annual income and how many years it would need to be replaced.
- M – Mortgage – The remaining cost of your mortgage.
- E – Education – The amount of money you would like to give to your children for school.
All of these formulas can be reworked to suit your own individual needs to help determine how much coverage you should have.
Despite no annual salary, stay-at-home parents bring so much value to their families. If you know that a premature death would put your family in economic hardship, then there is definitely an argument for getting a life insurance policy. Luckily, there are plenty of affordable life insurance policy coverage options out there so you can find one that suits your needs.
