It is a commonly held misconception, in families where one parent works outside of the home to bring home a paycheck and one parent stays at home to do the homemaking jobs, it is enough for the money-earning half alone to have life insurance. It is, in fact, one of the many mistakes families make regarding life insurance. Most of us underestimate the importance and value of the homemaker, even when it comes to the cost of trying to replace their valuable contribution should anything happen to them. Whether you want to or not, everyone should consider purchasing life insurance. Make sure that each one knows the company name to prevent lost life insurance.
It’s a fact that non-employed spouses often get overlooked when considering life insurance coverage, particularly in a lower income bracket. It’s important not to overlook their contributions and the economic value they have to the household. When a non-employed spouse in a single-income family with small children is lost, it is often very costly to replace the duties he or she performed especially if there are no friends or relatives available to provide assistance. Full-time childcare is estimated to cost between $3,000 and $15,000 annually per child; nannies cost significantly more. A family with young children can easily find themselves in financial trouble, spending $10,000 to $30,000 a year on childcare until the children reach school age, at which point expenses begin to decline. For a low or middle income family without insurance this is devastating.
Consider also the cost for meals. To make up for the cost of childcare, the remaining parent may work evenings or overtime to compensate for the added expense. If this is the case it may be difficult or impossible to get a meal prepared for the family and it may be necessary to find outside help (if the children aren’t old enough to do it themselves). The additional cost of an evening meal can run $100 and up per week, depending on the meal.
Housecleaning is an expense some single-income parents also may not consider, and can also add costs from $50 to $150 a cleaning. Looking at the costs, a single-income parent may consider hiring a full-time nanny to cook, clean and provide the surrogate child care needed. Factor in the counseling which may be necessary to the family after such a devastating loss and finding insurance for a homemaker is beginning to sound like a better and better idea all the time.
It’s possible to pay for these expenses out of pocket, of course, but this is often not easy or even possible for many single-income homes, limiting it as an option only for the wealthy. Remarriage is also a conceivable option but that might be asking an awful lot both from the newly widowed parent and anyone entering the relationship. The most likely, the safest, and the best possible option would be purchasing life insurance coverage on a needs-based cost-replacement analysis – exactly the same way coverage is determined for the employed spouse. Figure the approximate costs to replace the necessary services needed with the loss of the homemaking spouse and purchase enough coverage to cover those costs. And it shouldn’t just be for one year but multiple years since it’s likely the young children may still be several years from school age.
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