Whether you're a stay at home mum or dad, or you're the family breadwinner, it's essential to have the right financial protection in place for your family.
The unpaid work of a stay-at-home parent is often something thats overlooked, but the cost of these daily chores could add up if you were no longer around.
Find out why life insurance is just as important for stay-at-home parents and what options are available.
Do stay at home parents need life insurance?
Yes, life insurance can be beneficial for stay home parents.
It’s more common to protect the breadwinner of the family so their income can be replaced should the worst happen.
But have you ever thought about what would happen if a stay-at-home parent was no longer around to carry out their daily jobs?
Would the breadwinner need to cut back on work hours or get a new job to ensure they can be there for the kids?
Life insurance pays out a lump sum if you die during the term of your policy, providing much needed financial support regardless of what type of parent you are.
Why is life insurance important for stay-at-home parents?
The work of a stay-at-home parent is just as valuable as a parent who works.
Whilst it doesn’t earn you an income, without you there would be a big financial impact.
Research shows that all the jobs a parent carries out day-to-day could earn an income of £70,768 per year if it was a salaried role.
Life insurance could help to:
- Pay for additional childcare costs or allow your partner to reduce their hours at work to be there for your children
- Help to cover mortgage costs to keep your family in their home
- Pay for help around the home (such as a cleaner)
- Cover household bills and utilities
- Fund daily living (such as food shops, trips out, after school activities etc)
- Pay for your funeral
Ultimately, it means there can be minimal disruption to your family’s usual routine during a time of bereavement.
How much life insurance should a stay-at-home parent take out?
Every family is different so it’s hard to give a one size fits all answer for how much life insurance you need.
To work out how much cover you need, you could write down the list jobs you do day-to-day and how much time you spend doing them.
This list could include jobs such as:
- Childcare
- Cooking
- Cleaning
- Laundry
- Other chores
- Transportation
- Family scheduling (planning activities, appointments etc)
- Emotional support
- Helping with school work
It can also help to look into how much your family would be spending if you weren’t around to do these jobs.
For example, the average cost of part-time childcare (25 hours) is £7,569 per year, rising to £14,501 for full time (50 hours).
We have a handy life insurance calculator tool which you can use to input everything you’d want to cover to help you work out your ideal cover amount.
What policy options are available for stay-at-home parents?
There are a range of different life insurance policies available, the most popular types include:
Level term life insurance
This will cover you for an agreed amount of time (the term) and will pay out if your die during this time.
The pay out amount will remain the same throughout the policy term.
One of the main benefits of term life insurance is that you can choose how long your policy lasts for. As a stay-at-home parent you could choose to have your policy last until your kids reach financial independence (for example, 18 or 21).
Decreasing term life insurance
This will cover you for an agreed amount of time (the term) and will pay out if you die during this time.
The pay out amount will decrease during the policy term, often at the same rate as a repayment mortgage.
It’s an ideal option if you want to make sure your family can stay in their home should the worst happen.
Whole of life insurance
Whole of life insurance covers you for life, guaranteeing a pay out when you die.
It can be an expensive option as you’ll need to pay for your policy until you die to keep your policy active.
It could help to provide your loved ones with an inheritance and/or cover the cost of your funeral.
Family income benefit
Family income benefit is similar to term life insurance as you’ll be covered for an agreed amount of time.
The big difference is that your family will receive monthly payments (like an income) rather than one lump sum payment.
It can be difficult to budget a large sum of money, especially when navigating grief. Receiving monthly payments allows for easy family budgeting and could help to cover monthly childcare costs, schooling expenses and everyday living.
Joint life insurance
Any of the policy types mentioned above can be taken out on a joint basis.
Joint life insurance will cover both you and your partner and will pay out if one of you dies during the policy term.
It can help you to save money on a policy as you’re only paying for one premium, but you’ll only get one pay out.
Life insurance with critical illness cover
Critical illness cover can be added to level term, decreasing term and family income benefit for an additional cost.
It allows you to make an early claim on your life insurance policy if you're diagnosed with a specific serious illness.
The pay out could be a great financial help if you were to become ill and would struggle to look after your children and carry out your daily jobs.
Some policies also include children's cover, which will pay out if your child becomes seriously ill.
How can a stay-at-home parent apply for life insurance?
Buying life insurance is the same process for any parent.
When you apply for life insurance you'll need to:
- Decide on a policy type and cover amount to best suit your needs.
- Provide the insurer with your details (such as age, medical history, smoking status and other lifestyle factors) so they can calculate the price you'll pay.
- If you're happy with the price, you can accept the policy and have peace of mind that your loved ones are covered.
- During this process you could also consider writing your policy in trust. It's a free option that helps to detach your policy from your estate when you die. It means that your loved ones won't have to pay inheritance tax on the pay out.
You can get quotes directly from insurers until you find one that fits into your budget, or you can use a comparison site (such as Confused.com) to do the hard work for you.
Tips for finding the best policy
- Work out the cost of your unpaid work to estimate how much cover you'll need.
- Consider joint life insurance to help you save money on a policy. This will pay out if either you or your partner dies during the policy term.
- Lead a healthy lifestyle (drinking in moderation, not smoking and maintaining a healthy weight) to benefit from your cheapest premiums.
- Compare multiple life insurance policy types and providers to find the best one for your needs.
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