Are you working?” I asked the young mother of two whose husband was purchasing a life insurance policy for himself. She answered, “no, I’m a stay at home Mom.” The husband told me they had thought of purchasing a policy for her, but since life insurance is “income replacement,” they would wait until she went back to work before they would consider a policy for her. I bluntly asked him, “if your wife were to pass away, what would it cost to replace her “services?”
After looking at me with a “I can’t believe you asked that question look”, they started looking at how much it would cost to get a full-time child-care provider, a housekeeper (who cooks), a driver to drive the children to school (when they started) and doctor appointments, etc., etc. I told them the replacement cost of the average contribution a wife makes at home is worth about $45,000 a year (based on a recent survey done by Penn Mutual Insurance Company).
Was that amount worth protecting for them? After looking at that number, they decided to purchase a 20-year term life insurance policy with a death benefit of $500,000. As she was young (27) and healthy, that policy would only cost them about $19 a month. Where else can you purchase peace of mind for less than $20 a month?
Sometimes life throws a curve ball, and sometimes, that curve ball comes in the form of tragedy. Now, it’s not healthy to mull over what would happen to our loved ones in the event of our death, but it’s also naive to think that we’re immune to danger. This is one of the reasons that life insurance exists. In the event of death, life insurance provides a financial cushion for our family and loved ones.
But which person in a household should have life insurance? If you’re the main source of income for your family, then it should be no question whether you have coverage. But what if you’re not the breadwinner? If you’re not the wage earner, you might wonder, “Do I need life insurance?”
Though a family with only one working parent may think they only have one income to protect, the truth is that should the stay-at-home parent suddenly pass, there are a number of costs that the family would incur, just to handle the tasks that the stay-at-home parent was accomplishing on a daily basis. According to a study published by Salary.com, the average stay-at-home parent works more than 90 hours a week, which would be a salary equivalent to over $100,000. Therefore, it’s important not to count out the non-breadwinners “income.”
Think of it in terms of a traditional two-parent household: If one person is out earning income, it’s a good chance that other person is caring for children and maintaining the home—duties which are constantly overlooked in terms of their importance and value.
Any stay-at-home mom or dad wondering, “Do I need life insurance?” should assess their current situation and imagine how their absence would affect their family. If you were to die, not only would that put an emotional strain on your partner, but it would put him or her in a financial bind. Daycare isn’t cheap, neither are long-term babysitters. The loss of the non-breadwinner in the family would cause increased child-care expenses for the breadwinner, which—even for the most highly-compensated breadwinner—can be a strain. This is an argument for non-breadwinners to purchase life insurance.
Another reason why it is beneficial for non-breadwinners to also be insured, is to offer a “cushion” of sorts for the surviving spouse. It is likely that the emotional stress of the death of a loved one could lead them to have to cut back on working hours or take additional time off. Having a payout from a life insurance policy can help ease this burden.
Generally, a breadwinner would take out a policy that covers about 10 – 20 times their annual salary, depending on their age. This should also apply to non-breadwinners. If you estimate that it would cost $25,000 a year to provide childcare and house cleaning, it would be worth taking out a $250,000 policy. Although that sounds like a large investment, it works out to less than $15 per month, which is a reasonable investment for anyone looking for peace of mind.
Term life insurance is more affordable than most people think. If you’re considering purchasing life insurance, use our free, easy & private online quote tool to get instant quotes from some of the top-rated insurance companies. If you have any additional questions, the team at Intramark Insurance is always here to help. Give us a call at 866-691-0100.