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When my husband and I started shopping for life insurance, I’d just gone through a lot of life changes all at once:
Moving to a new city
Launching a business
Pregnant with my first child
My first thought was that we’d only take out a life insurance policy for my husband, since my new business barely even cleared its own expenses. Read: I wasn’t making very much money, as it was taking longer than I’d hoped to find steady clients.
But I was surprised to learn that it’s common for partners without income to consider a life insurance policy as well. (Learn more about life insurance myths, and what parents should know.)
First, I was glad to learn about why I needed my own life insurance policy, as I thought about taking care of my soon-to-be child.
And second, it was unexpectedly affirming to put a value on the work I did at home. While many parents embrace “leaning out” to focus on their kids, I struggled with the idea of not earning my “fair share” of the household income. Despite essentially being a stay-at-home mom, I didn’t like feeling dependent on my husband.
As it turns out, in his own way, he was dependent on me, too.
You’ll usually hear that life insurance is designed to replace the income one partner contributes to the household. A more accurate explanation is that life insurance covers the monetary value you contribute, which doesn’t always come in the form of a paycheck.
Men and women spend an average of 1.5 hours and 2.25 hours, respectively, on household activities every day. Non-employed married moms spend 3.8 hours on household activities and 4.2 hours on childcare.
That could include, but certainly isn't limited to serving as a:
Teacher, especially during a pandemic with many children learning from home
Babysitter or daycare provider
Coordinator of other professionals like electricians, handymen, gardeners and more
With that in mind, there are a few reasons why stay-at-home moms and dads need life insurance.
Let’s say that the non-employed spouse were to (sadly) pass away. Replacing part of this estimated 10 to 26 hours of housework per week with one weekly maid service would cost an average cost of $167. That adds up to $8,350 over the course of a year (assuming two weeks off for holidays). And that doesn’t even include laundry!
In other words, life insurance can protect the many money-saving jobs a SAHP handles for the household. (If you're debating whether to become a SAHP, find out how to calculate whether you can afford to quit your job.)
As a general rule, life insurance will cost less when you're young and healthy. So, if you're on the fence about applying for coverage even though you don't earn a salary, time could be one motivating factor. In fact, the difference in annual life insurance price for a 25-year-old compared to a 45-year-old could be as much as 133 percent.
In other words, waiting to get life insurance until your kids are older and you're ready to rejoin the workforce may actually be a pricier strategy over the long haul.
From time to time, especially around Mother’s Day, my friends share articles about the salary a stay-at-home parent deserves. The premise is, basically, "How much would it cost to replace a stay-at-home mom?" The conclusion is often that no dollar amount is truly enough, but that the “jobs” stay-at-home parents (usually moms) perform should earn a salary of $160,000 or more.
I appreciate the sentiment, but to be honest, I’ve never felt totally comfortable reading these articles. The attempt to put a formal number on some of the quotidian aspects of my life, like making meals or soothing a tantrum, often feels more condescending than empowering to me. Not to mention that these articles seem to assume a stricter division of roles than might really be true. (If my husband cooks dinner more than I do, would I have to take a “pay cut” from my imaginary “mom salary”?)
Interestingly, the life insurance industry seems to understand this nuance. Underwriters (the people who figure out whether an insurance can offer you coverage and for how much) use “does it make sense?” as a guiding question, says Mary Carolyn Woodall, associate medical director at EMSI Insurance, the underwriting firm that assesses life insurance applications for Fabric.
As Woodall says, assigning a blanket value to a stay-at-home parent’s duties won’t fit every family.
Generally speaking, life insurance is meant to replace money you would have earned. “Just as car insurance pays to repair or replace your car, life insurance is intended to replace the value of an individual had they continued to live rather than die unexpectedly,” Woodall says.
So, if my husband—the primary income earner—were to pass away, the life insurance benefit would help me keep our household afloat. From the insurer’s perspective, it makes sense to protect the family’s income first, and then the support partner next.
Life insurance also works off of your specific combination of financial, health and lifestyle factors, so it makes sense for underwriters to start by covering the partner bringing the actual finances to the table.
Generally, Woodall says, the SAHP’s coverage is a pretty simple math equation. In most cases, insurers will approve somewhere between 50 percent of the income-earning spouse’s coverage to a full match. In other words, if my husband’s getting a $1,000,000 policy, I might get $500,000.
“For the non-income-earning spouse, the value is based on the contributions made to making the household function well. This would typically cover care for any children, the income-earning spouse, housekeeping and maintenance,” she says. Like the “mom salary” article writers, underwriters are calculating how much it costs to replace your share of the work. But in this case, it’s based on your real resources.
Childcare is pretty easy to quantify. Simply look up the average cost of childcare in your state. In Maryland, where I live, we could easily sink a cool $14,000 a year into infant care. We now have two kids, so one of us staying home and watching them (and thus saving on the cost of childcare for both of them) provides significant value to our household.
Next, there’s what Woodall refers to as “care for the income-earning spouse.” This may have more to do with opportunity cost. Having someone in your corner to handle unexpected logistics often makes it easier to juggle an ambitious career. For men in particular, being married seems to connect to better earning potential. “Care for the income-earning spouse,” anyone?
In the case of life insurance, this might mean a financial cushion that would allow the income-earning spouse to step back a bit from work in the case of a family crisis. It could also cover the cost of paying someone to help with logistical or personal assistant-type tasks.
Depending on your family, this could mean anything from paying for private grade school to covering a college tuition. If your kids are in private school or if you plan to help pay some or all of their college costs, then you might want to calibrate your life insurance policy accordingly. Even if you're not the income earner, your kids' education funds could be affected if your spouse needed to redirect money to help with the household or to take time off to grieve.
This is especially true if you home-school. Previously more of an anomaly, home-schooling is increasingly common in the coronavirus era, and in many cases families might choose not to go back to traditional school even after the pandemic ends. If this applies to you, then you might want to budget for a potential life insurance benefit to defray the costs of sending your children back to school.
After that, you can think about the cost to replace housekeeping and maintenance that the stay-at-home spouse handles. This is sort of your own version of that “stay-at-home salary” article. If you were out of the picture, how much would your spouse realistically have to spend on a housekeeper? Who would handle pet care, vehicle maintenance and other responsibilities?
If paying for your final expenses would take a bite out of your family's nest egg, a life insurance policy could help offset those costs. A standard funeral can easily cost in the ballpark of $7,000 or $8,000, so having those expenses covered might take a load off of your spouse.
Even if you don't work right now, you might plan to rejoin the workforce at some point to account for growing expenses as your children get older. That could include extracurricular activities, braces and whatever else crops up.
If you were no longer around for that period of expansion as your children grow up, would your spouse be able to handle those growing costs alone? If not, life insurance may be able to help.
Even if you're not the person getting a regular paycheck in your family, your contribution allows your spouse to excel at work and build wealth over time. If you both live to old age, you might hope or expect to leave some form of an inheritance behind for your kids. To help ensure that this is possible even if you weren't around to enable your spouse's career success by managing the home front, you might turn to life insurance. That way, if something were to happen to you, your family would receive a death benefit that could contribute to savings for the future.
Going through the life insurance application process reinforced what I had always believed: My husband and I were a team. Our household relied on his income for that period in time, but my insurance policy value reflected the impact I had on his professional life.
Lots of committed partnerships, mine included, can go through phases where one person’s professional growth takes priority. Those priorities can switch later so both people have a chance to pursue their career or take more of a supporting role at home. If your income goes through a major change, it may be worth reevaluating your coverage needs and updating your policies.
If you apply through a company like Fabric, you can submit your application online without needing to meet in person or get on the phone with a salesy agent. The application takes around ten minutes to fill out, and you could be approved on the spot and start coverage right away.
Increasingly, you're even able to get a life insurance policy without a health exam, though not everyone qualifies to skip the medical check. We'll let you know right away if we're able to make an offer immediately by using advanced algorithms to assess your levels of risk. If we can't make an immediate offer, our underwriters may still be able to evaluate your application through other means such as looking at your doctor's records and prescription history; if so, you may still be able to receive an offer without undergoing a health exam.
In broad terms, if you're approved for life insurance, you should get the same rate as a stay-at-home parent as you would otherwise. Factors that can affect whether you can receive coverage (and at what price) include things like your health situation and your lifestyle.
For example, if you fly private planes or enjoy skydiving on the weekends, there's a good chance you'll face higher rates. Similarly, if you smoke or have major health issues, your rates would probably be higher than if you didn't, and there's a chance you might not be offered coverage at all.
Actual rates will vary based on your individual situation, but here are sample rates for a term life insurance policy for a 30-year-old woman in excellent health in Florida, based on Fabric's quote estimator:
|10-year term||15-year term||20-year term|
Being a SAHP may or may not be your long-term plan. Maybe you intend to transition back into the workforce once your kids are school age. Alternatively, life happens and circumstances might force you back into a full-time job.
Your policy is there to protect your ability to meet major financial goals, like sending kids to college or paying off your house. If your income—and lifestyle—undergo a significant change, you may want to adjust your life insurance coverage accordingly.
Generally, Woodall says, underwriters will evaluate the additional coverage you plan to buy, but the paperwork might be as simple as an updated application saying your health hasn’t changed since you originally applied.
“It is important to review life insurance coverage whenever there is a major lifestyle change—the birth of a child, purchase of a new home and additional earned income,” Woodall says.
Putting a price tag on the value you bring to your household is more complex than salary alone, especially when you’re a stay-at-home parent. Work and home life is often a complex, evolving arrangement.
As for me, I didn’t expect life insurance to draw such a clear link between my contributions and my spouse’s, but I’m glad it did. As it turned out, getting covered gave us more confidence to handle the next phase of our life together, as a team.
Fabric exists to help young families master their money. Our articles abide by strict editorial standards.
This article is meant to provide general information and not to provide any specific legal advice or to serve as the basis for any decisions.
Fabric isn’t a law firm and we aren’t licensed to practice law or to provide any legal advice. If you do need legal advice for your specific situation, you should consult with a licensed attorney and/or tax professional.
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Accidental Death Insurance policies (Form VL-ADH1 with state variations where applicable) and Term Life Insurance policies (Form ICC16-VLT, ICC19-VLT2, and CMP 0501 with state variations where applicable) are issued by Vantis Life Insurance Company (Vantis Life), Windsor, CT (all states except NY), and by The Penn Insurance and Annuity Company of New York (NY only). Coverage may not be available in all states. Issuance of coverage for Term Life Insurance is subject to underwriting review and approval. Please see a copy of the policy for the full terms, conditions and exclusions. Policy obligations are the sole responsibility of Vantis Life.
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