stay at home parent

Should Stay at Home Parents Get Life Insurance?

October 21, 2021

October 21, 2021: Approximately 18% of parents in the United States consider themselves SAHP, or stay-at-home parents. While they may not bring home a huge salary, the contribution of the SAHP to the family unit is beyond measure. Many parents in this situation question whether they need life insurance, what size the policy should be, and what the proceeds of that coverage would go towards in the event of a parent's passing. 

SAHP Job Description

Life insurance is intended as an income replacement in case of your demise. If you are a stay-at-home parent, this is difficult because your work has an undefined value. Running a household requires performing a variety of tasks that would cost a great deal if you were to hire out for these positions, including the following:

  • Chauffeur
  • Chef
  • Childcare provider
  • Housekeeper
  • Project manager
  • Tutor

Necessity of Life Insurance for Homemakers

For a SAHP, a life insurance policy shouldn't be viewed as an income replacement. Instead, a life insurance policy functions as a way to continue getting all of the SAHP's many jobs covered after their passing. The primary role of a parent cannot be filled with money, but the surviving spouse can use insurance money to hire a nanny, a housekeeper, or a tutor to fill in the gaps, at least temporarily. Having this financial safety net available provides peace of mind to both parents, knowing that all those little tasks will continue for the family even during the worst of life's events. 

Recommended Policy Size

After deciding that a life insurance policy is beneficial for a SAHP, the bigger question remains: how much do you need? This cannot be answered simply. Every family has different needs and goals based on age, size, location, financial situation, etc. For example, consider a $250,000-400,000 policy for a 20-year term, enabling coverage for the years before the children move out. Think through these three primary areas to determine if you need a bigger policy:

  • Cost of childcare - how much would you need to cover these expenses in the absence of the SAHP? One year of childcare can run between $10,000 and $30,000 per year, per child.
  • Cost of education - calculate your needs for school supplies, fees, extracurriculars, and tuition, if applicable. The average annual tuition at a private school is $10,700 per child.*
  • Household expenses - if something happens to the SAHP, who will clean the house, cook, and do laundry? Wages for household help average $26 per hour.*

Stay-at-home parents should recognize the financial role that they play in their family. While no amount of money could ever replace the loss of a parent, a term life insurance policy can help to carry on some of the SAHP's essential tasks during the difficult time following their passing.

*Ramsey Solutions

About 1891 Financial Life

At 1891 Financial Life, we pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs. 

Our portfolio is extensive, ranging from various life insurance policies to our MYGA to support your financial needs no matter what stage of life you’re in. For more information, contact us at (855) 804-7424.