Life Insurance Needs for a Stay-at-Home Spouse

The death of a parent is a devastating event for a family, but the death of a stay-at-home parent can have more than just an emotional impact.  Most families ensure that the wage-earning spouse has life insurance, but what about the stay-at-home parent?

Every family knows the emotional value of the stay-at-home spouse, but what about the literal value of the services that parent provides?  Consider the value of childcare, housekeeping, cooking meals, doing laundry, providing transportation, grocery shopping, arranging home maintenance, etc.  The cost of childcare outside the home is high, at an average of almost $9,000 per year, and can be higher for infants and toddlers.^[1] By looking at the financial equivalent of all the services the stay-at-home spouse provides you can begin to get an idea of the financial impact of that parent’s death on the family.

As soon as the stay-at-home parent becomes ill or passes away, the need for their services begins.  Initially, you may be fortunate enough to have family or friends help out, but it is unlikely that their generosity can continue indefinitely, as they may have their own families to look after.  By providing a stay-at-home spouse with their own life insurance policy, the family can deal with the emotional impact of the loss without worry for the financial impact.

You may be wondering how much life insurance you will need.  It’s an individual answer, as there are no set guidelines and each family is unique.  Look at how your family operates and what services the stay-at-home parent provides.  Generally, you should consider enough insurance protection to cover an individual’s salary for the number of years until the youngest child has graduated college.  In the case of a stay-at-home spouse, the salary would be the literal value of the services provided.  You may also want to consider funeral costs, medical expenses, estate taxes and inflation in your calculations.

There are two basic types of life insurance you can choose from:  term insurance and permanent life insurance.  Term insurance is an affordable way to obtain the death benefit protection at a lower cost than permanent life insurance.  Term policies typically range from 5 to 20 years and may be renewable.  The term policy’s death benefit is only in effect for the duration of the policy.  Renewing the policy can be an expensive option in the long term, but converting the term policy to a permanent life insurance policy may be an option during the first few years of the policy.  Look for a term policy with a conversion privilege so that if you do decide to switch to permanent life insurance, you can avoid having to submit evidence of insurability.

Permanent life insurance can offer coverage for your entire life and accumulate tax deferred cash value. The cash value can be borrowed against for buying a home or paying for college.  Also, the death benefit is typically guaranteed as long as your premiums have been paid and there are no loans due against the policy.  Many permanent life insurance policies allow you to lock in the premium amount for the life of the policy, giving you the comfort of a known premium for the future.

Whichever type of policy you choose, consider life insurance for the stay-at-home spouse in your family.  It can allow you the freedom to be with your family and attend to their emotional needs during a difficult time, instead of focusing on financial ones.

^[1] See www.childcare-guide.com for more information.