When I was talking to my dad about how much life insurance to buy, he commented that they’d never bought it for my mom because she didn’t work. He viewed it as income replacement. I’ve read, however, that you should consider buying life insurance for a stay-at-home mom because she performs tasks that would cost a lot of money if you had to hire other people to do them.

The Housewife’s “Salary”
It’s been calculated that a housewife’s salary would be anywhere between $117,000 and $134,000 if she were compensated for all the household and childcare tasks she performs.

Reasons to Buy Stay-at-Home Mom Life Insurance
Many couples forgo life insurance for a SAHM because they assume that the surviving husband will be able to perform all the duties once performed by the stay-at-home mom. But will he?

Let’s think about her major duties:
Child care
Laundry
Grocery shopping
Cooking
Cleaning
Errand service
Tutoring
Household bookkeeping

In addition to assuming all of these duties, the husband would still have to work a full-time job to maintain the family income. He may even want to take some time off work to grieve and spend time with his grieving children.

Unless a grandparent or helpful relative is available to move into the house and take over some of these tasks, the husband will have to hire people to handle at least some of them, especially child care. He may also need to find someone to help with housekeeping and cooking until the family develops a new routine.

Reasons Not to Buy Stay-at-Home Life Insurance
Buying life insurance for a SAHM may not be financially feasible if the family is already stretched thin. In addition, neighbors, friends, and relatives do typically rally around a family that has suffered the loss of a parent. They provide meals, household help, and childcare for free. The help may last long enough for the surviving parent to readjust the budget to afford additional costs and develop a new household routine.

How Much Insurance to Buy
If you do choose to buy life insurance for a SAHM, research the going rate for the needed household services. Multiply that by the number of years until your youngest child reaches an age you feel confident he or she would be safe home along after school. For many parents, that’s 11 or 12 years old.

For example, if a nanny in your area costs $700 a week, you would need at least $36,400 a year. If you opt for daycare that costs $1000 a month, you may also need a housekeeper to come in once a week at $70 per visit for the first year. The amount you choose depends on the care/services you believe are best for your children.

Once you calculate these costs, add a pad of about 20% to cover funeral costs, medical bills, unanticipated costs, inflation, etc.

What Type of Insurance to Buy
Regardless of the amount of insurance you choose, opt for term life insurance, which has better rates and conditions than whole life insurance.

The tricky part is determining the term. Insurance is typically available in 10, 20, and 30 year terms. Since my husband and I both work and have roughly 30 years until we retire/the mortgage is paid off, we opted for 30-year-terms to lock-in low rates now. You may only need a 10 or 20 year term for a SAHM because the kids will be grown by then. You might consider buying a term that will cover her until the youngest child is 12, or simply canceling it when the youngest child is 12 (make sure your policy doesn’t have surrender or cancellation penalties.)

A $200,000 10-year policy for a healthy young mom could be as low as $12 a month. If you can only afford life insurance for one parent, then the income-earning parent is the obvious choice. However, if you can make room in your budget for a policy for the stay-at-home mom, too, it’s worth it.

Comments

5 Responses to “The Argument for Stay-at-Home Mom Life Insurance”

  1. Ken on December 11th, 2009 4:54 am

    Good point. My wife is a stay at home and I am going to discuss this with her.

  2. Kyle on December 11th, 2009 5:35 am

    I don’t know that daycare would be running $1,000 we pay $320 for an infant and a 3 yr old. House keepers would probably run more than $70.

    But either way it is important that people realize if something does happen to a SAHM not only do you have these additional burdens on the dad but the funeral and services have to be paid for as well.

  3. Debbie on December 11th, 2009 8:38 am

    Great info! I’m looking for life insurance for myself,son, and my husband and was wondering which insurance companies are trust worthy and inexpenesive there are so many out there. thank you

  4. Aryn on December 11th, 2009 10:08 am

    Oops, Kyle! I meant a $1000 a month, not a week. The cost does vary regionally, though. Housekeepers also vary regionally, and depend on whether you hire an independent worker or a maid service.

    Debbie, I would start with your homeowner’s insurance company (if you own a home). By adding life insurance to our policy, we got a 55 discount on the home, which covers at least some of the cost of the life insurance. If you don’t have a home, look into AAA’s group plan or something similar.

  5. Matt Bell on December 12th, 2009 9:20 am

    Great article that raises an important point. We have life insurance for my wife, who is a stay-at-home mom. The reason we’ve made the decision to be a one-income household is that we want one of us to be with our young kids during the day. If something were to happen to her, the life insurance would at least enable me to be much less dependent on earned income.

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