Updated: March 2017
Q: As a stay-at-home parent, do I need life insurance? My family lives on one income, so is it worth setting aside money for a life insurance policy for me?
A: Yes, it is very important that parents have life insurance, says Matt Elwood, an Allstate agency owner in Port Angeles, Washington.
“For a stay-at-home parent, consider the economic value of all you do for your family, like caring for children, maintaining your home and daily transportation,” Elwood says.
If something unfortunate should happen, life insurance can help pay for things like child care and educational costs or allow the other parent to take time away from work. “The most important thing you can do is get the protection your family needs,” Elwood says.
The cost of life insurance is a common concern, particularly when a family is relying on one income, Elwood says. He notes, however, that people typically overestimate the cost of insurance. For example, a $250,000 term policy for a healthy 30-year-old could cost about $150 a year, according to a 2014 study by the Life Insurance Market Research Association (LIMRA) and nonprofit organization Life Happens. The study found that consumers over 25 estimated the policy would cost more than twice that amount.
Elwood says term insurance, which offers coverage for a set amount of time, can be a great place to start since it's often the most affordable option. The National Association of Insurance Commissioners (NAIC) says term life insurance may be an appropriate option for a family raising young children while also making mortgage payments. Many term policies can also be converted to permanent insurance, which can be a useful option down the road.
Elwood also notes that typically the younger and healthier a person is, the less expensive the costs of insurance are. So the sooner you get life insurance, the more affordable it will likely be, he says. A life insurance agent can work with you to find what will fit within your budget while also keeping in mind the amount and type of coverage that's appropriate for your family. Remember to ask if there are discounts available for having multiple policies, such as home, auto and life, with the same insurer.
Elwood suggests keeping the following in mind when selecting life insurance for a stay-at-home parent.
Family members. How many people would your life insurance benefits need to help? Think about children's ages and if they have any special needs. If you have younger children, the money may need to last a long time. Or you may want a higher policy amount to help cover expenses for a child with special needs.
Lifestyle. Consider what you’d want for your family, such as having money for child care, if something should happen to you. Elwood recalls a customer who paid off the mortgage and kept the family business going with the benefits from her husband’s life insurance policy. During such a difficult time, they were thankful they didn't have to worry about financial issues.
Length of time. If you elect to get a term policy, make sure it's for an appropriate amount of time, Elwood says. Consider how long it will be until your kids turn 18 (or graduate college) or how many years until your spouse can retire.
Additional benefits. If you are applying for term insurance but eventually want permanent coverage, ask your agent if the policy has an option to convert. Elwood says you may also want to ask your agent about adding riders, when available, to add supplemental benefits to your policy.
While it can be difficult to think about the reasons for needing life insurance, an experienced agent can help walk you through the process of choosing a policy. With all you do for your family on a daily basis, Elwood says life insurance can help give you peace of mind that they're protected.
Talk to an Allstate agent to learn more about your life insurance options.