When you think of life insurance, the first thing that might come to mind is protecting your loved ones in case you pass away unexpectedly. And while that’s certainly an important reason to have life insurance, there’s another group of people who might benefit from having it: stay-at-home parents.
Although stay-at-home parents might not have a traditional paying job, they still provide valuable contributions to their families. They take care of their children, keep the house in order, and provide emotional support to their partners. Losing a stay-at-home parent would be devastating not only emotionally but financially as well.
Here’s why stay-at-home parents need life insurance and how they can determine how much they need.
The Cost of Childcare
One of the biggest expenses families face is childcare. According to Care.com, the average cost of putting one child in a childcare center in 2021 was $226 per week, while the cost of a nanny for one child was $694 per week. For a stay-at-home parent, the cost of childcare might not be immediately apparent. After all, you’re already taking care of your children at home, so why pay someone else to do it?
But in the event of your unexpected death, your surviving partner might need to hire a caregiver to take care of the children so that they can continue to work. The cost of childcare could quickly become a major burden for your family.
Additional Expenses
Childcare isn’t the only expense your family might need to pay for in the event of your death. If you’re the primary caregiver for your children, your partner might need to hire a housekeeper or someone to help with other household tasks so that they can focus on their job. Additionally, there might be medical bills or funeral expenses that need to be taken care of.
Calculating Your Life Insurance Needs
So how much life insurance do you need? A good starting point is to calculate the annual cost of childcare in your area and multiply that by the number of years until your children are old enough to take care of themselves. For example, if the cost of childcare in your area is $20,000 per year and your oldest child is four years old, you might want to consider a $200,000 life insurance policy.
Of course, this is just a starting point. You’ll also want to consider other expenses that might arise in the event of your unexpected death, such as hiring a housekeeper or paying for medical bills. You might also want to consider factors like inflation and any outstanding debts you have.
Term Life Insurance vs. Whole Life Insurance
Once you’ve determined how much life insurance you need, you’ll need to choose between a term life insurance policy or a whole life insurance policy.
Term life insurance policies are typically more affordable than whole life insurance policies. They provide coverage for a set period of time, such as 10 or 20 years, and are designed to provide financial protection during the years when your family is most vulnerable. If you die during the term of the policy, your beneficiaries will receive a lump-sum payment that can be used to cover expenses like childcare and household help.
Whole life insurance policies, on the other hand, provide coverage for your entire life and typically include a savings component. They are often more expensive than term life insurance policies, but they also offer more flexibility and a higher level of financial protection.
