Back in September, we talked about how to calculate how much life insurance you need. I’m sure all of you stay-at-home parents took the article to your spouses and said, “Honey, you need more life insurance!” or maybe even just, “Honey, you need life insurance!” (After all, less than ⅔ of Americans even have life insurance in place.)
But what about you? Do you have life insurance? Do you even need it?
The Purpose Of Life Insurance
The commonly listed reasons that people buy life insurance are:
- To cover final expenses
- Replacement of income
- Transfer wealth or leave an inheritance
- Cover a mortgage
If you’re a stay-at-home parent, your spouse is already covering the mortgage. Number 3 might be cool, but it’s not exactly necessary. You have no income to replace. So #1 is the only one that applies to you, right?
If you follow that line of thinking, then all you would really need is a $10,000 policy or a $10,000 savings account. That should be enough to cover your final expenses.
But do you think your absence would only have a $10,000 effect on your family’s finances?
No, I don’t think so either. You may not have an income or pay the mortgage, but you’re worth a whole lot more financially to your family. Just because no one pays you doesn’t mean that what you do for your family isn’t worth a lot of money.
The purpose of life insurance is to provide financial stability to your family in the event of your death. If your spouse had to start paying someone to do everything that you do, that would definitely bring some financial instability to your family.
The Economic Value Of Stay-At-Home Parents
So what is it that you do that would cost money to have someone else do? Here are a few:
- Yard work
- Meal preparation
- Grocery shopping
- Transporting children/elderly parents
- Planning vacations
I’ll bet you could add a few more things to that list as well. In 2016, Salary.com did a Mom Salary Survey. Since stay-at-home moms don’t have pay stubs to work off of, they had to calculate hours, types of tasks completed, etc. to see what their true “economic value” is.
How much are we worth? Probably a lot more than even our spouses make!
According to their calculations, mothers work 92+ hours a week and what they do would translate to a $48,509 base salary with $94,539 in overtime, for a total of $143,102. I guess that means I was worth time and a half when I was peeling wet pajama pants of my daughter at 4:15 am this morning.
How Much Life Insurance Stay-At-Home Parents Need
I guess that must mean stay-at-home parents need life insurance. Even if the surviving spouse decides to forego sleep in order to take care of most of the home-making activities, childcare alone necessitates life insurance.
The average cost for a week of childcare for one kid at a center is $196. Fifteen hours a week of an after-school babysitter costs $214 and to go all out and hire a nanny costs $556 a week. And don’t forget summer, when all of the kids are out of school!
How much life insurance you need will depend on how old your kids are, how many you have, what tasks you do around the house, and how much family help your spouse would get for free if you were gone. Here’s how to calculate it:
1. Make a list of everything you do that would need to be paid for if you were gone. You can use my list above as a starting point.
2. Calculate about how much each of those things will cost. Remember, as your children age, their childcare needs will change. They shouldn’t need a nanny at 17.
3. Decide how long those expenses will need to be paid. Your kids will grow up eventually, and hopefully, your spouse can figure out how to do the laundry eventually as well.
4. Add in any major expenses you would like to be able to pay for from heaven, such as your funeral or your kids’ college.
5. Add together the numbers from steps 2 and 4. That’s how much life insurance you need. Step 3 told you how long you need it.
How To Afford Life Insurance For Someone Who Doesn’t Make Money
Did you know that 80% of consumers overestimate the cost of life insurance? It’s not as expensive as you think!
My personal life insurance policy only costs me $10 a month. And that gives me $250,000 of coverage for 20 years. Not bad, huh?
Go get yourself some quotes. The question isn’t how you can afford life insurance, but rather, how can you afford not to have it?