Generally, financial gurus recommend that you get 5-20 times your annual income in life insurance coverage.
But what if you have no income because you’re a full-time, stay-at-home parent? Or what if you contribute a few hundred bucks a year to the family bank account from your side hustle, while you mostly stay home with the kids?
We all know that zero multiplied by anything is zero, but that doesn’t mean that a stay-at-home parent should not have life insurance. In fact, as a stay-at-home parent, you make hugely valuable contributions to your household — contributions that would cost your family a pretty penny should something happen to you.
The Value of a SAHM (Stay-At-Home Mom)
According to a recent Salary.com survey, the value of a stay-at-home mom in 2016 (sorry, dads, you weren’t part of the survey this time) would cost about $143,000 if you had to outsource those jobs. The survey looked at the services provided by a typical homemaker, including housekeeper, child care, chauffeur, and more. If you had to hire someone else to take care of all those services, you’d pay a lot to do it.
But does that mean that a stay-at-home parent needs more than $1 million in life insurance? Probably not.
Related: The Complete Guide to Life Insurance
The truth is that in single-parent households, not all of these services are outsourced. Yes, if something happened to you, your spouse would have to pay for daycare and would probably like to pay for extra services like housekeeping. But plenty of working single parents clean the house, make the lunches, plan the doctor’s appointments, run to school and soccer practice, and still work.
The Goal is Something In Between
While your stay-at-home parent services are invaluable for your family, you don’t want to wind up with more life insurance than you can afford. So when you’re deciding how much term life insurance coverage to buy for yourself, you’ll have to do some personal calculations and some hard thinking.
Here’s one process for deciding how much life insurance to carry for the stay-at-home parent in your family:
Step 1: Calculate What You Actually Need
First, talk about what life would look like if that parent died. No one likes to think about this possibility, but to make good life insurance decisions you must.
Which services would the surviving spouse need (or want) to outsource? Look into the cost of full-time child care in your area and include that in your calculations. You may also want to check out things such as housekeeping services.
Remember to look at the ways a stay-at-home parent saves your family money, as well. For instance, many stay-at-home moms are able to shave hundreds off the monthly grocery bill by meal planning, couponing, and cooking at home. If something happened to this parent, the family’s food costs could go up quite a bit.
Related: How to Create a Bare Bones Budget
Also look into counseling services. If something happens to your children’s primary caregiver, chances are they’ll need some professional help to cope in a healthy way. How much would some basic grief counseling or therapy cost your family?
Again, it’s not fun to think about these possibilities, but it’s essential to choosing the right amount of life insurance for a stay-at-home parent.
Step 2: Figure Out How Much It Costs
Second, research how much life insurance coverage would cost. Term life insurance rates are typically low. But if you’re a one-income family living on a tight budget, you may not be able to afford much coverage. On the other hand, if rates are very low, you might be able to afford the luxury of more coverage.
The key is to make sure you can pay for it, even if you get into a bind financially. Not paying your premiums can result in a termination of coverage, which is not a place you want to find yourself.
Step 3: Decide How Much to Buy
Finally, choose how much coverage you want. Your best bet is to apply through a broker, so you can get the best deal on the amount of coverage you need. It’s also easy to get life insurance quotes online.
One Broker Option: Looking for Life Insurance? Quotacy Can Help
Having the right type of life insurance coverage for both parents in a family can give you peace of mind. You can sleep well knowing that you’re protecting your family, and especially your children, in the worst possible circumstances.
If one partner in your family stays at home with the kids, calculating life insurance needs can be more complicated, because you can’t just multiply your annual income. Take the time to figure out how much coverage the stay-at-home parent warrants, though. It is an important step in making sure your family is well-protected.