Why life insurance matters for both working and stay-at-home parents

Shelly Gigante

By Shelly Gigante
Shelly Gigante specializes in personal finance issues. Her work has appeared in a variety of publications and news websites.
Posted on Mar 31, 2021

The contributions that parents make to their family’s financial well-being extend far beyond whatever income they earn, a fact made plain by the COVID-19 pandemic.

Indeed, moms and dads, including both stay-at-home parents and those who are gainfully employed, have been forced to assume far greater unpaid responsibilities around the house since the global health crisis began, becoming full-time childcare providers and educators as schools and daycare centers slammed shut.

Overwhelmingly, those responsibilities fall to the mother.

A Pew Research study in October 2020 of families with children under age 12 found that employed mothers who telecommute were more likely than employed fathers (57 percent versus 47 percent) to say it has been difficult to juggle child care duties while working.1 At the same time, a Kaiser Family Foundation study found that one in 10 working mothers with children under age 18 said they were forced to quit their job due to COVID-19, and half of that group cited school closures as a primary reason.2

Parents who are full-time caregivers, whether by choice or circumstance, already perform a multitude of unpaid tasks that help to stabilize their household income.

Beyond the nurturing they provide, a commodity that cannot be measured, a 2019 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.3

That does not include the savings they may garner by caring for their aging parents or in-laws. Indeed, the national average monthly cost of adult day care in 2020 was $1,600, while assisted living facilities cost an average of $4,300 and home health aides cost an average of $4,600 monthly.4

Such attempts to quantify the unpaid work that 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.

A stay-at-home parent typically needs coverage so that, if he or she died, the breadwinning 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), housecleaning services, tutors, elder care (if needed), and potentially more prepared meals on busy weeknights.

How much would that be? Child Care Aware of America reports that the average annual cost of child care alone in the U.S. is between $9,000 and $9,600 per child. 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).5

Overlooked need?

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 is 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. (Discover 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.” (Related: 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.

Discover more from MassMutual…

Life insurance: 3 income tax advantages

Top 5 mistakes when purchasing life insurance

Is group life insurance enough?

Need financial advice? Contact us

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Pew Research, “A rising share of working parents in the U.S. say it’s been difficult to handle child care during the pandemic,” Jan. 26, 2021.

Kaiser Family Foundation, “Women, Work, and Family During COVID-19: Findings from the KFF Women’s Health Survey,” March 22, 2021.

Salary.com, “Super Moms: What’s a Mother Worth?” 2019.

Genworth, “Cost of Care Survey,” February, 21, 2021.

Child Care Aware of America, “The US and the High Cost of Child Care: A Review of Prices and Proposed Solutions for a Broken System,” 2018.

The information provided is not written or intended as specific tax or legal advice. MassMutual and its subsidiaries, employees, and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own and do not necessarily represent the views of MassMutual.