Does a stay at home spouse need life insurance?

A lot of advisors and clients ask me this question all the time. After all, conventional wisdom dictates that you buy life insurance only for the breadwinner. That may have been true many decades ago. In our modern world, do you think that is still the case?

When it comes to life insurance, there's a tendency to focus on what the breadwinner brings to the table. It is a huge oversight for advisors to NOT take into account the value of the person who is not in a full time job earning a paycheck. The person who works just as hard to ensure that life goes on - every day. The person who cooks, cleans, runs errands, takes care of the kids, house, pets and everything else!

And I'm not talking about just women. According to Pew Research in 2019, the share of stay at home dads made up 17% of stay at home parents in 2016 and that number continues to rise.

Did you know? Nearly 1/3 of breadwinners will be in financial trouble within a month if they did not have assistance from their spouse. Why? There's a mourning a period that must be taken into account. Each person is different when it comes to mourning and some take longer than others to resume to regular activities such as work. Then, they'll have to pay for things like child care, house cleaning and eat out more.

According to Care.com, the national cost of child care in 2019 was $10,000 per year and if you are a picky parent and wants a nanny, that cost goes up. The average national hourly rate for house cleaners cost between $120-150 for a single family home according to Home Advisor. While frequent dining out at restaurants may sound appealing to some, it could definitely add up not only in terms of dollars but equally in pounds.

Even without children, it is still a huge adjustment. Think about it: would the bills stop coming? Who will do the errands? Or take care of the pet? What happens when you get sick and you're all alone? The list goes on.

So, do both spouses need life insurance? The answer for most people is YES!

If it is yes, then how much life insurance does a stay at home spouse need?

While we cannot truly put an exact dollar amount on the value the stay at home spouse brings to the table, most insurance companies limit the amount of insurance to $1 million assuming that the working spouse also have that much. There are different formulas used by each insurance company and some exceptions to the rule but a good guide is that if the breadwinner qualifies for $1 million of insurance and we can financially justify that they can afford it, then the stay at home spouse should get the same amount. If you come across someone who requires more, be prepared to justify the amount you would like to request from the insurance company.

The next time you're in front of a couple and they ask if the non-working spouse should get life insurance and for how much, you know what to say.

If you have additional questions on this topic, please email me at peachie@peachinsurance.net.