If your household relies on you for money, one of the main reasons to get life insurance is to help replace your salary. In other words, you should get life insurance even if you are unemployed. In addition, couples often neglect to buy life insurance for the stay-at-home parents because they assume that only parents who earn a salary need coverage.
Moreover, it’s an error to underestimate the financial help stay-at-home parents offer. Although they might not have a six-figure salary from a fancy workplace, stay-at-home parents offer the family a lot of useful services. Furthermore, this article will discuss what you need to know about life insurance for stay-at-home parents, the coverage amount, and what to do during an unthinkable situation.
Why Stay-at-Home Parents Need Life Insurance
The major advantage of life insurance is that it replaces your salary when you die, which provides financial coverage for your family. Additionally, obtaining life insurance for stay-at-home parents is reasonable for parents who bring home an income. However, life insurance should be considered by stay-at-home parents as it may help your household settle some expenses of replacing the services the parent used to offer, including;
- Accountant.
- Child Support.
- Driver.
- Cleaner.
- Laundry worker.
- Foodservice.
- Nurse.
- Instructor.
- Pet caretaker.
- Instructor.
Stay-at-home parents get an average earning in the range of $184,820. This showcases parents’ significant daily tasks for their families, despite not completing all the tasks included in the website’s research. Moreover, when you sustain an injury or are sick, the other parent may be mandated to cover expenses for essential services that keep your home working well.
How Much Life Insurance Do Stay-at-Home Parents Need?
Most of the time, your income is a major factor when estimating the amount of life insurance coverage you need. This is because of your desire for a death benefit that might cover your salary for a fixed amount of time.
Calculating life insurance coverage needs for stay-at-home parents without a traditional income can be particularly challenging. Since there’s no one-size-fits-all solution due to family differences, you should obtain a 15- to 20-year policy that pays at least $250,000–400,000.
What Does Life Insurance for a Stay-at-Home Parent Cover?
If you secure either whole or term insurance, your policy could help lower the financial burden on the surviving parent by covering some of the daily household duties of stay-at-home parents. Moreover, the selected beneficiaries will be offered compensation from the provider if they approve the death benefit claim. However, there are a few ways you could be able to benefit, such as the following:
One-time payment
The majority of beneficiaries choose to get their money all at once in one lump sum. This option could assist the surviving parent in covering high-balance debts, such as mortgages, depending on the death benefit amount. If you’re not diligent and need to pay some expenses like child care, this approach could be dangerous.
Certain payments over time
Instead of getting a single lump sum payout, the surviving parent may decide to collect a monthly payment for a certain length of time. For example, they may get $25,000 annually ($2,083 per month) for 20 years on a $500,000 death benefit payout. Moreover, this installment plan could ensure that money doesn’t run out immediately. In this case, the money would be held in an interest-bearing account by your coverage provider, and you would be taxed on the interest that the account accrues.
Retained asset account
Your insurance provider may also decide to place the money in a different interest-bearing account that functions similarly to a checking account as a settlement alternative. Your life insurance guarantees the interest rate as well as the initial deposit. Similar to a bank account, you’ll receive free checks and regular statements that you may use to cover the cost of a tutor, nanny, or other necessary services that the stay-at-home parent used to offer.
Annuity for life income
This type of annuity, as its name implies, gives the recipient money for the remainder of their life. When you file a claim for the death benefit amount, life insurance companies use your age to determine how much your annuity will be.
Do I Need Life Insurance for Stay-at-Home Parents?
Losing a stay-at-home parent would not only be devastating, but it can put a financial strain on the whole household. For this reason, it’s very important for parents who stay at home to get life insurance. There are a few reasons why parents should get coverage to protect their family from an unfortunate loss. The following reasons include:
- Replace the worth of your work.
- Pay off debt.
- Substitute future earnings.
- Pay for the funeral.
- Make a memorable impression.
- Preserve extra money.
- Get tax advantages.
- Ensure your insurance.
- Boost your savings.
- Bring comfort to your family.
For stay-at-home parents, obtaining a life insurance policy is the right way to assist the surviving parent in covering essential costs such as childcare and housework. A policy that provides adequate financial support for your family in case of the death of a stay-at-home parent can provide peace of mind. Furthermore, keeping up solid credit and saving for emergencies could provide an additional degree of protection if the working parent loses their job.