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.
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.
Why Stay-at-Home Parents Should Consider Life Insurance
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.
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.
How Much Life Insurance Should a Stay-at-Home Parent Get?
From time to time, especially around Mother’s Day, my friends share articles about the salary a stay-at-home parent deserves. 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 quotidien 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.
Starting With the Income-Earning Spouse First
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.
How Underwriters Calculate Coverage for Stay-at-Home Spouses
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, 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?
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?
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.
When SAHPs Return to Work
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. Alternately, life happens and circumstances might force you back into a fulltime 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.
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