Insurance is one of those things that we pay for that we hope we never use. This is probably no more true than when it comes to life insurance. Cashing in that life insurance policy means someone we love dearly is gone.
At the same time life insurance is a very important part of your financial plan. In a cold sense, the purpose of life insurance is to replace your income producing capacity in the event of your passing. For that reason it is generally recommended you have at least 10-12 times your income in life insurance.
But what about stay-at-home moms? They generally aren’t producing income. Should you have life insurance on them?
First, though a stay-at-home mom may not be producing a literal income, it is almost impossible to quantify the economic benefit that a mom brings to the family. So much of the love and care she provides is really priceless. So, should she still carry life insurance and if so how much?
The value of mom
Obviously, the love and care provided by mom is priceless and irreplaceable. But, if you look at some of the services provided by a stay-at-home mom to the family, what would the cost be if she were no longer there to provide them?
Chances are if mom is not there, you will need to pay for some form of day care.
Does mom do most of the cooking now? If the cooking duties are not shared, it is likely if one person is trying to provide for all the needs of the household, you may find yourself eating out more often.
Will the remaining family be able to pitch in and take care of day to day chores like cleaning and laundry?
Who will be transporting Junior to athletic practices, school functions, etc.
Time off work
When the unthinkable happens and mom is no longer there, chances are you will have a very hard time just functioning for a while. This is a very normal part of the grieving process. You will need time to adjust to an entirely new life. It may be that as a part of that process you may need to take some time off work, or perhaps you may need to look for a less demanding job in order to care for your family’s needs. This may well mean less income.
It is possible you or the children may need to see a counselor for a while to help process the grief.
Obviously there will be funeral and burial expenses to be paid as well as possibly some medical bills.
Does mom produce any income?
Does mom do any part-time work or does she do some work from home activities that provide income to the family?
So how much life insurance is needed?
You should examine your specific situation, as everyone is a little different. As a general recommendation I would suggest that you have at least somewhere between $300,000 and $500,000 worth of insurance.
How are your family’s finances today?
Are you deeply in debt and barely making it month to month? Or are you doing well with little debt and a plenty in savings? Obviously, the better shape you are in financially the more you would be able to absorb the economic impact of the things listed above and the less insurance you may need.
How old are the children?
Obviously a new born will require much more care and for a much longer time than will a 16 year old. Five children will cost more to care for than one. Will older children be able to help care for younger children? How much of the care of the household will older children be able to absorb?
Do you have family or very close friends near?
Do you have a parent or sibling nearby that could help with the care of the children and your household? Even if you do you may want to be able to compensate them some for the time they spend helping you.
Make sure you are protected
Obviously insurance money could never “replace” mom. These are things that we do not even want to think about. Sadly many families don’t and are unprepared if the worst would happen.
While insurance money can never begin to replace mom, having that money available will at least remove an additional layer of stress from a time of intense grief. Spend some time evaluating the things above to determine how much coverage you need.
While I have written this with regards to a stay-at-home mom, I recognize that in some families those roles are reversed. Clearly all the things mentioned here would apply equally well to a stay-at-home dad.
If your family has a stay-at home parent, do you have sufficient life insurance coverage?