Life Insurance for Stay-at-Home Spouses
When most people think about life insurance, they think about replacing the take-home pay earned by the family’s primary breadwinner should he/she die. Yet it could be just as important to insure a stay-at-home parent.
The issue is one of valuation: how do you set a dollar figure on the contributions that a stay-at-home parent makes to a family? Start by looking at the functions he/she provides: cooking, cleaning, childcare, shopping, laundry, paying bills. How much would it cost to pay someone to provide those same services?
For a newly single parent of two children, the price of continuing to work could mean spending as much as $40,000 or more a year on childcare and household services. If you can’t imagine finding that kind of additional cash flow, it makes sense to cover your spouse with a life insurance policy to pay those expenses for as many years as needed.
How to Do It
You have two choices: you can take out a separate policy on your spouse that names you as the beneficiary, or you can add a spouse rider to your own policy. The advantage of a rider is that it can be cheaper than securing a separate policy for the stay-at-home parent.
On the other hand, if your spouse dies after you do, the rider typically doesn’t pay a death benefit to your spouse’s beneficiary. In addition, your spouse will have no access to cash value accumulation since the policy and cash values are owned by you. And with some insurance companies, you can’t secure as much coverage on your spouse in a rider as you can in a separate policy.
If there are other reasons for your spouse’s life to be insured than simply replacing his/her homemaking services — like designating different beneficiaries or meeting estate-planning objectives — a separate policy might be the better choice.