A Guide to Purchasing Life Insurance for Stay-at-Home Parents

Being a stay-at-home parent is a full-time job, and though it may not come with a paycheck, it certainly comes with its own set of financial responsibilities. One such responsibility is ensuring that you have adequate life insurance coverage to protect your family’s financial future in the event of your unexpected passing. While life insurance may not be a topic many stay-at-home parents think about, it is an important consideration, and this guide will provide some helpful tips for purchasing life insurance as a stay-at-home parent.

In this article:

• Why Do Stay-at-Home Parents Need Life Insurance?
• What Are Some Common Misconceptions About Life Insurance for Stay-at-Home Parents?
• What Are the Benefits of Having Life Insurance as a Stay-at-Home Parent?
• How Much Life Insurance Coverage Should a Stay-at-Home Parent Have?
• Are There Any Specific Types of Life Insurance Policies That Are Best Suited for Stay-at-Home Parents?
• Can a Stay-at-Home Parent Purchase Life Insurance on Their Own, or Does It Need to Be Done Through the Working Spouse?
• What Are Some Common Mistakes That Stay-at-Home Parents Make When It Comes to Life Insurance?
• Frequently Asked Questions About Life Insurance for Stay-at-Home Parents

Case Study

Fatima and Malik are a married couple with two young children. Malik works as an accountant and earns a comfortable salary, while Fatima has been a stay-at-home parent since their first child was born. Fatima takes care of the children, manages the household, and provides a variety of other services that would be costly to replace if she were to pass away unexpectedly.

Fatima and Malik understand the importance of life insurance and have a policy in place for Malik. However, they haven’t considered the need for life insurance coverage for Fatima since she doesn’t have an income. A financial advisor helps them understand that life insurance coverage for Fatima is just as important as it is for Malik, and recommends that they consider a policy for her as well.

The advisor works with Fatima and Malik to determine the appropriate amount of coverage for Fatima’s policy, taking into account the cost of replacing her services and the family’s financial needs. They decide on a 20-year term life insurance policy for Fatima with a coverage amount of $500,000.

One year later, Fatima is diagnosed with cancer and passes away a few months later. While the loss of Fatima is devastating for Malik and their children, they are grateful that they have the financial security provided by Fatima’s life insurance policy. The policy payout allows Malik to take time off work to grieve and take care of the children, pay for Fatima’s medical bills and final expenses, and cover the cost of hiring someone to help with the household tasks that Fatima used to take care of.

In the end, Fatima’s life insurance policy provides a financial safety net that allows the family to focus on healing and moving forward during a difficult time.

Why Do Stay-at-Home Parents Need Life Insurance? 

Stay-at-home parents provide valuable services that would be costly to replace if they were to pass away. While they may not earn an income, their contributions to the household are significant and should be considered when determining the family’s life insurance needs. Here are some reasons why stay-at-home parents need life insurance:

1. Childcare: Stay-at-home parents often take care of children full-time, providing essential childcare services. If the stay-at-home parent were to pass away, the surviving parent would need to hire someone to take care of the children, which can be expensive.
2. Household duties: Stay-at-home parents also take care of household duties like cooking, cleaning, laundry, and grocery shopping. These services can be costly to replace if the stay-at-home parent were no longer around.
3. Financial contributions: Stay-at-home parents may also contribute financially to the household, for example, by managing the budget, paying bills, or saving money. If the stay-at-home parent were to pass away, the surviving parent would need to take on these responsibilities or hire someone to do it for them.
4. Funeral expenses: Life insurance can also help cover the cost of funeral expenses, which can be significant.

Stay-at-home parents need life insurance to ensure that their contributions to the household can be covered in the event of their death.

What Are Some Common Misconceptions About Life Insurance for Stay-at-Home Parents?

There are several misconceptions about life insurance for stay-at-home parents that can prevent them from getting the coverage they need. Here are a few of the most common ones:

1. “Stay-at-home parents don’t need life insurance”: Many people assume that life insurance is only necessary for the primary breadwinner in a family. However, stay-at-home parents provide valuable services like childcare, cooking, cleaning, and managing the household, which would need to be replaced if they were no longer around. Life insurance can help ensure that these services can be covered in the event of the stay-at-home parent’s death.
2. “Stay-at-home parents don’t qualify for life insurance”: Some people assume that stay-at-home parents are not eligible for life insurance because they don’t have an income. However, life insurance policies can be purchased to cover the costs of replacing the services provided by the stay-at-home parent.
3. “Stay-at-home parents don’t need as much coverage as working parents”: Many people assume that because stay-at-home parents don’t earn an income, they don’t need as much life insurance coverage as working parents. However, the value of the services provided by stay-at-home parents can be significant, and it’s important to consider the cost of replacing those services when determining the appropriate amount of coverage.
4. “Life insurance is too expensive for stay-at-home parents”: Some people assume that life insurance is too costly for stay-at-home parents to afford. However, there are many affordable life insurance options available.

What Are the Benefits of Having Life Insurance as a Stay-at-Home Parent?

There are several benefits of having life insurance as a stay-at-home parent. Here are some of the most important:

1. Protecting your family’s financial future: If you were to pass away, your family would likely face significant financial challenges, such as the cost of replacing your services, funeral expenses, and other bills. Life insurance can provide a financial safety net that can help your family continue to pay bills, cover daily expenses, and maintain their standard of living.
2. Providing for your children’s future: If you have children, life insurance can help ensure that they are provided for in the event of your death. The payout from your life insurance policy can be used to cover their education expenses or provide for their financial needs. Additionally, whole life insurance policies can be used to build cash value over time, which can be accessed to help pay for your children’s future expenses or to provide them with a financial cushion later in life. Whether you choose term life insurance or a whole life policy with cash value, it’s important to consider the long-term financial needs of your family when selecting a policy.
3. Peace of mind: Knowing that you have life insurance coverage in place can provide you with peace of mind, knowing that your family will be taken care of if the worst were to happen. You can rest easy knowing that your loved ones won’t face financial hardship in the event of your death.
4. Flexibility: Life insurance policies can be tailored to meet your specific needs and budget. You can choose the amount of coverage you need, the term of the policy, and the premium payment options that work best for you.
5. Access to other benefits: Some life insurance policies may offer additional benefits, such as critical illness coverage or disability coverage, which can provide further protection for you and your family.

How Much Life Insurance Coverage Should a Stay-at-Home Parent Have?

The amount of life insurance coverage that a stay-at-home parent should have will depend on several factors, including the family’s financial budget and needs, the cost of replacing the services provided by the stay-at-home parent, and the number of dependents in the household.

To determine how much coverage is needed, it is important to first calculate the value of the stay-at-home parent’s services. The value of the services provided by a stay-at-home parent can be significant, so it’s important to calculate the cost of replacing those services. This might include the cost of childcare, cooking, cleaning, laundry, and other household tasks.

It is also important to consider the family’s overall financial needs, including any outstanding debts, future expenses, and ongoing living expenses. Once you have an idea of the family’s financial needs and the cost of replacing the stay-at-home parent’s services, you can determine the amount of life insurance coverage that is needed.

The amount of coverage needed should be enough to cover these expenses and provide a financial safety net for the family. Additionally, the term of the policy should be long enough to cover the time period during which the family would need the coverage, such as until the children are grown and out of the house.

It’s important to work with a financial advisor or life insurance agent to determine the appropriate amount of coverage for your specific situation. They can help you calculate the value of the services provided by the stay-at-home parent and provide guidance on the amount of coverage needed to protect your family’s financial future.

Are There Any Specific Types of Life Insurance Policies That Are Best Suited for Stay-at-Home Parents?

There are several types of life insurance policies that are well-suited for stay-at-home parents, depending on their specific needs and preferences. Here are some options to consider:

1. Term life insurance: Term life insurance is a straightforward type of life insurance that provides coverage for a specified term, such as 10, 20, or 30 years. This type of policy can be a good option for stay-at-home parents who want affordable coverage that will provide a financial safety net for their family during the years when their children are growing up.
2. Whole life insurance: Whole life insurance is a type of permanent life insurance that provides coverage for the policyholder’s entire life. This type of policy can be more expensive than term life insurance, but it also offers additional benefits, such as the ability to build cash value over time.
3. Universal life insurance: Universal life insurance is another type of permanent life insurance that provides coverage for the policyholder’s entire life. It is similar to whole life insurance but offers more flexibility in terms of premium payments and death benefit amounts.
4. Joint life insurance: Joint life insurance policies cover two individuals under one policy, typically a married couple. This type of policy can be a good option for stay-at-home parents who want coverage for both themselves and their working spouse.
5. Riders: Some life insurance policies offer additional riders that can be added to the policy to provide additional benefits. For example, a waiver of premium rider can allow the policyholder to skip premium payments if they become disabled, while a critical illness rider can provide a lump sum payment if the policyholder is diagnosed with a covered illness.

It’s important to consider your specific needs and budget when choosing a life insurance policy. Working with a financial advisor or life insurance agent can help you determine the best type of policy for your family’s unique situation.

Can a Stay-at-Home Parent Purchase Life Insurance on Their Own, or Does It Need to Be Done Through the Working Spouse?

A stay-at-home parent can purchase life insurance on their own, even if they don’t have an income. However, the coverage amount may be limited by the insurance company’s underwriting guidelines.

In some cases, it may be more practical for the working spouse to purchase life insurance for both themselves and their stay-at-home partner or with a joint policy, as the working spouse typically has an income and is therefore more likely to qualify for higher coverage amounts. However, this is not always the case, and it may be beneficial for the stay-at-home parent to purchase their own policy if they have their own financial obligations or if they want to ensure that their contributions to the household are covered in the event of their death.

What Are Some Common Mistakes That Stay-at-Home Parents Make When It Comes to Life Insurance?

Here are some common mistakes that stay-at-home parents make when it comes to life insurance:

1. Assuming that they don’t need coverage: Many stay-at-home parents assume that life insurance is only necessary for the primary breadwinner in the family. However, as we’ve discussed earlier, stay-at-home parents provide valuable services that would be costly to replace if they were to pass away, making life insurance coverage just as important for them.
2. Underestimating the value of their contributions: Stay-at-home parents may not realize the true value of the services they provide, which can result in inadequate coverage amounts. It’s important to accurately assess the value of their contributions to the household when determining the appropriate amount of coverage.
3. Relying solely on employer-provided coverage: Some stay-at-home parents may assume that they are covered under their working spouse’s employer-provided life insurance policy. However, these policies may not offer sufficient coverage, and they may not be portable if the working spouse changes jobs or becomes unemployed.
4. Not reviewing coverage regularly: Life insurance needs can change over time as circumstances change, such as when children grow up and become financially independent. Stay-at-home parents should review their coverage regularly to ensure that it still meets their family’s needs.
5. Not considering additional benefits: Some life insurance policies offer additional benefits, such as critical illness coverage or disability coverage. Stay-at-home parents should consider these additional benefits when selecting a policy to ensure that they have adequate coverage in the event of an unexpected illness or disability.

Conclusion 

Stay-at-home parents provide invaluable services that are essential to the functioning of a household. While they may not have a traditional salary or income, the financial impact of their contributions is significant and should be considered when determining the appropriate amount of life insurance coverage.

It’s important for stay-at-home parents to understand that they can purchase life insurance on their own, and that coverage for them is just as important as coverage for the primary breadwinner in the family. By accurately assessing the value of their contributions and working with a financial advisor or life insurance agent, stay-at-home parents can ensure that their family’s financial future is protected in the event of an unexpected death.

Avoiding common mistakes such as underestimating the value of their contributions, relying solely on employer-provided coverage, and not reviewing coverage regularly, can help stay-at-home parents make informed decisions about their life insurance coverage.

Ultimately, having life insurance coverage can provide peace of mind and financial security for stay-at-home parents and their families, allowing them to focus on what matters most – taking care of their loved ones.

Frequently Asked Questions (FAQs) About Life Insurance for Stay-at-Home Parents

Find a solution for what you’re looking for 

If you’re a stay-at-home parent, it’s important to know that you can still qualify for life insurance coverage, even if you don’t have an income. However, the coverage amount may be limited by the insurance company’s underwriting guidelines. It’s also important to accurately assess the value of your contributions to the household when determining the appropriate amount of coverage. Protect Your Wealth can help you get it by guiding you through the process of buying disability insurance and determining whether you may require individual disability insurance coverage.

To schedule a consultation about your income protection goals, or if you have any questions about insurance in Ontario or Canada, please contact Protect Your Wealth or call us at 1-877-654-6119 to talk to an advisor today! We’re proudly based out of Hamilton, and service clients anywhere in Ontario, British Columbia and Alberta including areas such as Oakville, Kingston, Medicine Hat, and Surrey.