The primary purpose of life insurance is to give financial support to loved ones in case a family provider dies.
You may think “breadwinner” when you read the word “provider.” But stay-at-home parents who don’t earn incomes are also providers, and their contributions should be considered when families think about who needs life insurance.
A sizable number of parents falls into that category. About 10.4 million moms and 2 million dads, who lived with children younger than 18, did not work outside the home in 2012, according to a 2014 report by the Pew Research Center.
Putting a price tag on parenting
Think of all the services a stay-at-home parent provides for the family for free. Now, imagine having to hire others to do the same work if that parent died. Of course, you can’t put a dollar value on everything a mom or dad does, but practical duties like child care and household chores carry a price tag if you had to find someone else to do them.
The average annual cost of child care varies by state and by type. For two children, the cost ranges from $8,616 for home-based care in South Carolina to $28,869 for center-based care in Massachusetts, according to a 2014 report by Child Care Aware of America called Parents and the High Cost of Child Care. Even at the low end of costs, that’s a big expense for a household budget to suddenly absorb.
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Assuming that Grandma or Grandpa will step in to shoulder the load may not be wise. Day-in, day-out child care is a far cry from occasional babysitting. Relatives may not have the financial or physical means to watch the kids every day while the surviving parent works.
Lock in life insurance early
Another reason to buy life insurance for a stay-at-home parent is to lock in coverage when the parent is young and healthy. Life insurance quotes increase for buyers as you age and/or develop health conditions, such as high blood pressure or high cholesterol. Some serious illnesses make it impossible to qualify for coverage. By putting off buying life insurance now, you risk paying higher rates or not qualifying for coverage later.
In later years, you might want to increase coverage for a stay-at-home mom or dad who returns to the workforce. If you think that’s a possibility, shop for a life insurance policy with a guaranteed insurability rider. This feature lets you purchase additional coverage without having to undergo a medical exam. Therefore, you can lock in low rates while you’re still healthy, knowing you can qualify to buy additional coverage, even if you develop a health condition.
Generally, both parents should have some life insurance to ensure that the family maintains its standard of living if one of them dies. The partners don’t have to have equal amounts of coverage. The sole breadwinner likely would be insured for more than the stay-at-home parent, at least for now. The family could increase the amount of coverage for a stay-at-home parent who returns to the workforce, either by purchasing an additional policy to beef up coverage, or — if the original policy allows it — adding coverage to the existing policy.
NerdWallet’s life insurance comparison tool can help you find the right amount of coverage and easily compare rates.
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