Moms and dads who stay at home may not command a paycheck, but their contribution to the family finances is valuable and profound.
Beyond the nurturing they provide, a commodity that cannot be measured, a recent survey found that stay-at-home parents would earn nearly $178,200 per year in the workplace, based on the salaries of jobs that reflect a day in the life of a mom or dad at home. Those duties include child-care provider, academic advisor, facilities director, event planner, psychologist, dietitian, and laundry manager.1
That does not include the value they may provide if they also care for aging parents or in-laws. Indeed, the national average annual cost of adult day care in 2022 was $20,280, while assisted living facilities cost an average of $54,000 and home health aides cost an average of $59,488 per year.2
Such attempts to quantify the value of unpaid work that stay-at-home parents provide are an interesting exercise in home economics, but they also underscore the need for families to protect themselves from financial loss in the event that a caregiving parent should pass away — something that often gets overlooked when purchasing protection products such as life insurance or, for that matter, disability income insurance. (Related: Why you need both life and disability insurance)
A stay-at-home parent typically needs coverage so that, if he or she died, the surviving spouse could protect his or her earnings potential while also paying for services to keep the household afloat. That includes child care (until the kids are older), elder care (if needed), housecleaning services, tutors as needed, and potentially more prepared meals on busy weeknights.
How much would that be? Care.com reports that the average monthly cost of child care alone in the U.S. is between $261 for an after-school sitter to $694 for a nanny. . However, the nonprofit group also notes that costs vary dramatically depending on location, age of the child, and facility type (i.e., day care center vs. private home).3
Corey Schneider, a financial professional with Sentinel Solutions in New York City, said many believe that life insurance is strictly designed to replace the income of an insured person who produces an income. Not so.
“We had a client 15 years ago who was trying to get enough life insurance on his wife,” he said. “He told me, ‘Look, I’m on a plane four days a week and there is no way I could do my job if something were to happen to my wife,’” said Schneider. “There would be no way he could earn the same living. It was then that I realized how important life insurance was for stay-at-home spouses.”
Other factors besides economic necessity can enter into the life insurance justification as well, Schneider suggested. Often, he said, when families decide to have one parent stay at home to raise their kids, it’s a decision that’s based on values.
“Most at-home spouses had a career of their own and they decided it was important to them to stay home with the kids,” said Schneider. “They didn’t want someone else to raise them.”
If anything were to happen, having a life insurance death benefit available as a safety net might enable the surviving spouse to make career decisions that he or she believes are in their children’s best interest.
For example, Schneider said one of his clients lost his wife several years ago. Her life insurance death benefit gave him the resources needed to take time off and grieve, a critical component of healthy healing, especially when kids are involved. (Related: Helping kids cope with grief)
He later switched to a less-demanding job so he could be with his kids more.
How much coverage do I need?
While life insurance can be a powerful tool that helps protect the ones you love, the amount of coverage you may need all depends on your unique financial profile.
MassMutual’s life insurance calculator can provide a rough assessment of your potential needs. And life insurance death benefits are generally paid out income-tax-free.
Families that have sufficient assets to maintain their lifestyle if either spouse should pass away may not need coverage at all.
For at-home parents who believe that a death benefit, if needed, would help protect their loved ones, however, a financial professional can help them determine an appropriate level of coverage and navigate any coverage limitations due to underwriting requirements.
Types of life insurance
Such a professional can also fully explain the difference between term life insurance, which provides a death benefit only if the insured passes away during the policy’s term, and permanent life insurance, which costs more, but provides a guaranteed payout to the beneficiaries as long as the policy is in force when the insured dies.
Such permanent policies also build cash value over time as you pay your premiums, money that can be used on a tax-advantaged basis for anything from college tuition to supplemental retirement income. Keep in mind that access to cash values through borrowing or partial surrenders will reduce the policy’s cash value and death benefit and increase the chance the policy will lapse. If this happens, it may result in a tax liability.
One other potential advantage of permanent life insurance is that it may liberate retirees to enjoy their retirement years more and spend down their savings without fear of depleting an inheritance for their heirs. (Learn more: How life insurance can help you in retirement )
“Keep in mind that people’s needs change over time,” said Schneider. “When you’re younger, having a death benefit is important because it may enable the surviving spouse to raise their children the way both parents wanted. But as you get older, you may wish to have a whole life insurance policy for estate planning purposes, or one with a long-term-care rider.” (Learn more: Term vs. perm life insurance: 3 considerations)
Stay-at-home parents perform a vital role in the family unit, creating a safe and supportive environment for their spouse and kids. While no parent can ever be replaced, they can take steps to protect their loved ones from financial loss if anything should happen to them.
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This article was originally published in March 2019. It has been updated.