Life insurance is a tricky subject. It's hard to know who needs it, and how much, and sometimes it seems like wasted money.
You'll often hear a general rule that you should have life insurance if someone else is relying on your income. While that isn't a bad rule, it completely fails to take into account the cost of replacing a stay-at-home parent. While a stay-at-home mom or dad may not be contributing income, they would be expensive to replace.
But just how expensive, and how much insurance do you need? There are a lot of variables to consider.
I think there are two main solutions that are considered if a stay-at-home parent dies: either hiring someone to take on his or her tasks, or the other parent cutting back or quitting work. Which option is more likely for your family depends on a lot of factors, including:
- How much money the working parent makes
- The career path of the working parent
- The availability of health care
- The parents interest in being a stay-at-home parent
Obviously, some situations lend themselves to the working parenting quitting work, so you'd be trying to replace their income, plus the value of any employer-provided benefits such as health care subsidies, plus the value of whatever total lifetime income loss came from stepping out of the workforce for a few years.
The other, more common, plan is to figure out how much it would cost to replace the efforts of the stay-at-home parent.
You might want to sit down for this.
According to a Salary.com survey, the value of services provided by a stay-at-home parent is $143,102 per year.
Now, that doesn't mean that everyone needs to run out and buy enough life insurance to cover that amount times the number of years until your youngest child turns 18. There's a lot more to consider.
- How old are your children?
- What tasks can they handle themselves? Which tasks could the surviving parent reasonable handle?
- Do you have friends or family nearby, or would you move near them? How much would they be able to help?
- Would you alter your lifestyle? Would you overall costs go up, or go down?
- What other income might be available, such as Social Security survivor benefits?
- Any other things unique to your situation.
Thankfully, military families can get up to $100,000 in Family Servicemembers' Group Life Insurance (FSGLI) coverage for very affordable rates. Not sure if you're covered? Check the servicemember's Leave and Earnings Statement and see if FSGLI is listed in the deductions column.
Of course, $100,000 may not be enough coverage for your family. Many military-oriented companies and organizations offer a wide variety of products to suit every need.
Life insurance on a stay-at-home parent might seem like a great place to trim the budget, but it's really not. They may not be bringing home a paycheck, but their value is pretty darn high.