Although everyone should have life insurance, not only for their own peace of mind, but to make sure that everything is taken care of financially in the event of your death, some people think that because their job doesn’t actually involve an income, that they do not qualify to have life insurance.
This is false. Everyone is eligible for life insurance from children, the disabled, the elderly, the unemployed and even stay at home parents.
Life insurance is not only to cover costs in the event of your death, it can also be used to provide you a means of support in the event of accident or injury.
Most life insurance policies are geared towards your current salary, and their final worth, or pay-out value is usually about ten times current salary. So a person earning $81,000 a year would be looking for a life insurance policy of around $800,000. This not only covers death, but also accident, where the policy can be used to provide a large percentage of the injured party’s salary enabling the injured to continue to meet their financial obligations.
How does this relate to a stay at home parent, they have no income?
For a stay at home parent their actual salary is not the important issue, the amount it would cost to replace their services is the figure that should be used when calculating the overall value of a life policy.
If the case of a stay at home parent, these would include services such as cleaning, cooking, day care services etc. How much would it cost a working, recently bereaved spouse to hire someone to do everything that you do so that they can continue working? This is your perceived working value and it is what your life insurance should be based on.
When taking out a life insurance policy for a stay at home parent, both spouses should discuss exactly what would be lost in the event of a death or injury and estimate how much it would cost to replace. When that is done the search for an appropriate life insurance policy can begin.
As a stay at home parent, not earning a salary per se, there is also the problem of who pays for your insurance. It doesn’t have to be you, your spouse can either take out life insurance for you, or agree to pay for the life insurance package that you have chosen. (Some couples opt for joint life insurance policies paid out the household accounts which cover the loss of either or both spouses).
A life insurance policy does not have to be funded by the person whose name it is in.
Problems may arise when a couple decide to split up or divorce, leaving one of the spouses with insurance premiums that they cannot meet. If this is the case you, as the stay at home parent should immediately contact your insurance company and inform them of the situation.
When negotiating your separation or divorce settlement with your estranged spouse you should also take life insurance premiums into account (together with making sure that you have physical access to the insurance documents). In certain circumstance you may be required to surrender the policy for its cash value and split the monies between you and your estranged spouse, then begin a new life insurance policy. (An attorney will argue that considering the money winner in the family paid for the policy of the stay at home parent; any surrender value is rightfully part of the marriage assets).
So, when you come to look for an insurance policy for a stay at home parent for either yourself, or your spouse, take into account how much it would cost to replace them, how much would be required to continue their ”services” in the event of an accident.
Just because you stay at home and look after the kids and the house, doesn’t mean you’re not worth anything – you are, hundreds of thousands according to current statistics. Make sure you have life insurance, and give your family and yourself peace of mind that things will continue as normal if you have an accident or worse.