A lady I met yesterday asked me do stay at home moms need life insurance? Nowadays, many news outlets constantly discuss the continuing rise of two-income households where both parents work, leaving the children in daycare or with extended family. In reality, recent years have seen a rise in the number of mothers who stay home to take care of their children.
If you’re a stay-at-home mom, you might wonder whether if stay at home moms need life insurance. Typically life insurance is bought to replace an income, and you don’t technically have an income. But your contribution has value. Big. Time. Value. In fact, the median annual estimated value for the work of a stay-at-home spouse or mother in 2019 was $178,201.
For example, stay-at-home parents of young children still have financial value to their family. If one of them dies, their surviving spouse will need to keep working to pay the bills, which means the kids will need a nanny or daycare.
Do stay at home moms need life insurance?
It is very important to consider the cost of replacing all of the positions that you fill as a stay-at-home mom. In 2014, Salary.com reported that the annual salary of a stay-at-home mom would be $118,905 per year if they were to get paid for all of the jobs that they did. In addition, Dave Ramsey, founder of Financial Peace University, estimated in 2006 that an insurance policy in the amount of $300,000 to $400,000 was necessary to cover the costs of what a stay-at-home mom does every day. It is true that a mom can never be replaced, but if something were to happen, your spouse would need to bring in help to cover your absence.
Some reasons why stay-at-home parents need life insurance
1: Replace the Value of their Labor: From driving kids back and forth to school or various activities to cooking all of the meals and everything in between, stay-at-home moms work every single day, 365 days a year, 24 hours a day. If we were to give moms a salary, it’d equal over $160,000 a year! If the unthinkable happens, your children would be taken care of.
2:Paying for Daycare Costs: Life insurance can help cover the cost of childcare should you pass away.
While it’s true that stay-at-home moms might not bring in much income, you do cover a major expense in the family’s budget: childcare.
The average cost of childcare in the US is $11,666 per child. Given that most families have trouble saving more than $500 for an emergency, hoping that your spouse can find an extra $12,000 in the budget each year to pay for daycare should you pass away is rather optimistic.
3:Cover Funeral Expenses: While a Life Insurance policy would cover way more than funeral costs, the expenses incurred for a funeral can be up to $10,000 and that may not cover everything. A Life Insurance payout can help with your final wishes and give your family peace of mind.
4:Pay Off Any Debts: From student loan debt, car loans, mortgage or any other debt, a Life Insurance payout would greatly help to settle any of your debts.
5:Help Plan for Future Expenses: Maybe you planned on returning to work to help plan for the future like college. A Life Insurance payout would help alleviate any of that stress on your loved ones and the future.
6:Give Loved Ones Peace of Mind: Losing a parent or partner is so incredibly difficult. A Life Insurance policy would help alleviate any of the financial stress on those left behind.
Now that we have agreed that moms need life insurance, here are some other considerations you should have before you buy your policy.
How Much Life Insurance Do You Need to Buy?
There are many rules of thumb that you can follow when buying life insurance. The trick is tailoring these rules of thumb to your own personal situation.
Rules of Thumb to Consider:
- 10 times salary
- 20 times salary
- Sum of all your debts
The main thing that matters when determining how much you need is how much you can afford.
Don’t become life insurance poor!
Basically, that means you shouldn’t be breaking the bank just to be able to your afford your life insurance premiums.
The bright side is that the rates on women in regards to life insurance is sometimes 10% to 20% cheaper than men.
Women are generally healthier than men and their rates on life insurance premiums represent that.
If you’re not exactly sure how much life insurance to buy, there are some very handy calculators on the web that can help you determine how much you actually need.
What Types of Life Insurance Should You Consider?
An ongoing debate exists between whether to buy term or permanent insurance otherwise known as whole life.
Let’s look at the differences of term life vs. whole life to see which one might make sense for you.
Term life insurance will cover you for the term that you’ve purchased. For example, if you buy a 20 year term policy then you will be covered for that 20 year period and it expires afterwards. Term life insurance is the most affordable type of life insurance that you can buy.
Whole life insurance does not expire and gives you coverage for your “whole life”, or for as long as you keep paying for the premium. Whole life also offers a cash value component meaning that after years of paying into it you can accumulate monies that you might be able to borrow off of to use to your preference.
The biggest disadvantage of whole life is the cost. You can expect to pay 10-20 times more for whole life insurance for the same coverage you would get with term.
If you’re budget is tight, I would stick to a cheap term life insurance policy.
Going Shopping for Life Insurance
Your safest bet is to go with an independent agent that’s able to use multiple carriers.
Be careful on the term independent though as sometimes it gets misused. Preferably you want an independent agent that can use several different carriers.
Why an independent agent? Because if you do have some sort of medical condition, an independent agent can shop it with multiple carriers on your behalf.
What is the monetary value of the tasks performed by the mom in your family and what insurance do you use to protect her? Leave a reply below