Since I’ve been tackling a lot of stressful financial situations in the lives of those I’ve counseled lately and in light of our upcoming baby #2, I thought I’d spend a little time to discuss the question of whether or not you should have life insurance on a stay at home mom. Let’s get a few basics out of the way first:
Strictly as insurance, I do not believe in “permanent” insurance (whole life, universal life, etc.). It is much more expensive than it needs to be as far as insurance goes and since we’re talking about INSURANCE (and not investments), let’s just stick to the idea of looking at term life insurance for a fair comparison in my examples and avoid all that debate for today.
I’m a HUGE advocate of having life insurance on SOME people. Do I need life insurance for Annie (who is not even 3 and brings in no income to our household) – NO. If she dies, we’d be emotionally crushed, but about the only impact to our finances would be the cost of her funeral and burial. A good way to be able to cover that is by getting a rider on an existing policy. It is cheap (per month) and $10,000 or so of coverage should be plenty.
Do I need life insurance on me? ABSOLUTELY – I’m the breadwinner in our family and if I die, Stacy needs income to be able to buy a Rolls Royce (strike) continue a reasonable lifestyle even if I’m gone. So that gets at the purpose of life insurance: replace needed income lost if someone in the family dies. That means if you don’t bring in any income to the family, you likely have no need for life insurance (beyond something to cover your burial). And that gets at today’s question – do families need to get life insurance on a stay at home mom?
Let’s consider what happens if a stay at home mom dies. Who takes care of the kids? Who takes care of the house? Who does the laundry, cooking, cleaning, etc.? Who takes care of the husband!? I know I may sound pretty traditional when I say all this, but Stacy brings REAL value into our home when she does any/all of the things I listed above. If she weren’t around, I’d have to pay someone to care for Annie (or depend on family). I’d have to spend more time handling household chores or pay someone to help. I’d have to take on all the household responsibilities now split between the two of us and somehow manage to keep working full-time. As anyone who is a single parent can attest, this would be HARD. I think Mary Poppins would be about the only person I could hire to pull off what Stacy does and I’m sure she wouldn’t be cheap.
When it comes to stay at home moms, I break my cardinal rule about life insurance. I believe there SHOULD be life insurance on stay at home moms because while they may not necessarily bring income into the household, if they disappear there is a lot of added expense that needs to be covered. So for that reason, I strongly suggest husbands show care to their wives and be sure there is insurance on her.
How much? The general rule for life insurance on someone bringing in income is to have 10 times the income you’d need to replace if they were to die. My rule for insurance on stay at home moms is to consider how much it would cost to take care of all the things you’d have to do if she were to pass and get 10 times that amount. For Stacy, we estimated we’d need about $25,000 per year for GOOD care for Annie (and the Bean when he/she arrives) and other stuff that might be needed. So we have a $250,000 policy on her.
How much does it cost? For us, it is less than $12 per month. Considering the comfort it brings us both, it is a GREAT investment. Of course the actual cost for your situation would depend on your coverage amount, your age, your health, etc., etc., etc. I bet a quote would surprise you though. It is CHEAP comfort. So what do you think? Do you have life insurance on every member of the family? If so, why? Do you have zero life insurance? Why not?