Being a stay-at-home parent is the toughest job in the world.
Beyond being responsible for every detail of a tiny human’s life, these superheroes contribute to a number of vital roles (usually at once) that make a family truly whole. Day in and day out, the children are cared for, the bills get paid, the house stays in working order, clean clothes are available to wear… the list goes on and on.
There’s a misconception that the only person who needs life insurance is the primary breadwinner of the household. They’re the ones who bring home a salary on a day-to-day basis after all, right?
This couldn’t be further from the truth.
According to US Census data analyzed by the Huffington Post, there are almost 12 million stay-at-home parents in America. That’s 12 million Americans providing a service to their loved ones that is both invaluable and, yet, somewhat hard to quantify.
Have you ever stopped to think just how much would it cost to replace a stay-at-home mom or dad? According to Salary.com’s calculations, the national average income for all the work a stay-at-home mom or dad accomplishes equates to about $113,000 if your family had to outsource it all (and pay the much-deserved overtime that goes with it.)
But being reminded not to take stay-at-home parents for granted is only part of the equation. The other, and arguably more important, part: how to ensure your family is financially protected if that person were no longer around.
The Financial Contribution of Stay-at-Home Parent
The cost of child care in America is staggering. While a stay-at-home parent does more than just care for children, it’s the expense that’s easiest to understand.
According to the National Association of Child Care Resource & Referral Agencies (NACCRRA) and the 2015 Parents and the High Cost of Child Care report from Child Care Aware of America (CCAoA), the average cost of full-time daycare in the United States is over $11,000 per year or $900 a month. And that price skyrockets for infants, who need more contact with child care workers.
If your family’s stay-at-home parent dies without life insurance, paying an additional $900 per month out of your pocket can be quite a burden for the surviving parent or guardian. According to the CCAoA study, the cost of childcare for dual income couples eats up an average of 15% of their earnings, while for single parents, it could exceed 24% of their median income.
That’s a lot of numbers and percentages to take into account (and we’ve only touched on childcare). Thankfully, sites like Salary.com have created a calculator where you can input the number of hours spent on housework, child care, home maintenance, cooking, driving, and a host of other tasks to find a comparable annual wage for the hours you work at home. It even takes overtime pay into consideration.
Why Life Insurance Might Be Necessary for a Stay-at-Home Spouse
The purpose of life insurance is to protect the people you love most financially. If a stay-at-home parent’s workload is valued at more than $100,000 a year, that’s a significant financial hit for any family to take.
Most experts recommend having coverage that’s five to ten times your annual income. But, does that rule apply to a stay-at-home parent who technically doesn’t earn a salary?
Yes, but it’s a little more complicated than that. (Clearly!)
Insurance for a stay-at-home parent is unique because you’re not replacing income. Instead, you’re replacing services that he or she provides on a daily basis, which an insurer might not necessarily recognize with a blanket “enter your income” question on an application.
Fortunately, you can use an online life insurance calculator to understand what a stay-at-home parent’s needs might be, but the process will be a little different.
So, here’s what you can expect.
Buying Life Insurance to Cover a Stay-At-Home Spouse
Buying spouse life insurance is easier now than ever before because of transparent, no-nonsense online life insurance processes like ours.
However, it gets a little more involved for an insurer to determine coverage eligibility when there’s no viable income to protect.
When our underwriting algorithm is processing an application, there are many factors evaluated. The more obvious factors include your health history or if you participate in any risky activities. But in addition to that, we must assess your financial situation to determine eligibility for the amount of coverage applied for and to ensure the affordability of the premium.
If coverage is for someone who is technically unemployed, we must assess your financial situation differently:
- If an applicant is not employed outside the home, we’ll ask for the coverage amount of the wage-earning partner. Typically, the stay-at-home spouse would be eligible for that amount of coverage or less.
- If your partner does not have any life insurance in force, we need to understand the reason for life insurance on the stay-at-home mom or dad specifically. For example, perhaps the non-working spouse has plans to work again in the near future or is finishing school. In some situations, the underwriter may determine you are not eligible for coverage. However, we try to make offers for coverage amounts and term lengths in most cases.
So what will the process be like? If you apply for a policy, it’s unlikely that you’ll be approved immediately for temporary life insurance coverage, which isn’t the ideal experience we aim to deliver.
The process is different because having no income and applying for coverage disqualifies from a no medical exam life insurance policy and triggers a need for an underwriter, not just the underwriting algorithm, to understand your specific situation better so they will need to ask additional questions. Once the underwriter can confirm that the coverage requested fits reasonably within the stay-at-home parent’s financial situation by learning more about the spouse’s income and coverage, it’s usually smooth sailing to finalizing coverage from there.
Keeping in mind the information above about the maximum amount of coverage that can be applied for and that the salaried spouse must be covered first, will alleviate frustration or disappointment in the process.
Once you’ve decided whether or not life insurance coverage is necessary, it’s time to:
- Ensure that the salaried spouse is covered first so that you can get equal or less coverage
- Decide how much coverage you need with an online life insurance calculator
- Pick a life insurance company
When choosing a life insurance company, it’s important to ensure that they’ll cover a non-salary-earning spouse. Once you know that’s possible, you should price compare with other top rated insurers.
One of the benefits of term life insurance over a whole policy is that coverage is often very affordable and competitively priced across insurers. For example, a 20-year, $500,0000 Haven Term policy for a healthy 35-year-old woman is about $19 per month, and we let you compare that pricing to others. If you opt for a 30-year term, it will cost about $33 per month.
When choosing a term life policy, look for level premiums. This ensures that your monthly costs will not go up over the length of the term. It’s a common feature for insurers to offer, but still an important one to make sure it’s a feature of the policy you’re considering.
You’ll also see many provides touting the rating of their company. What exactly does that mean? Well, an independent company such as A.M. Best does the homework on an insurer’s financial strength and record, to help assess its claims-paying ability and whether the provider is considered reliable and in good financial standing. A higher rating is an indicator of the company’s financial standing. We’d recommend providers rated A+ or better. MassMutual, which issues our Haven Term policy is rated A++.**
Financially Protecting Your Family
The idea of leaving behind your family is unfathomable. We know. However, preparing for the unexpected doesn’t make it happen any sooner.
Term life insurance coverage can be a key part of that sometimes-difficult preparation plan for a stay-at-home mom or dad. It’s a selfless service (on top of all the other selfless services they already provide) that offers not only protection for their loved ones, but peace of mind.
**MassMutual and its subsidiaries C.M. Life Insurance Company and MML Bay State Life Insurance Company are rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of January 15, 2017 and is subject to change. MassMutual has received other ratings from different rating agencies.