The advantages of life insurance for stay-at-home parents

Stay-at-home parents may not receive a traditional paycheck, but the daily care, organization, and support they provide are incredibly valuable to their families. From managing childcare and household routines to coordinating schedules and transportation, their work plays a critical role in keeping a household running smoothly. That’s why having a financial plan that includes life insurance is so important for helping families maintain financial stability if the unexpected happens. For many growing families, new parent life insurance can play an important role in helping care for loved ones during this important stage of life. Here’s a closer look at how life insurance for stay-at-home parents can help protect a family’s finances and provide stability when it’s needed most.

What to know about life insurance as a new parent

Starting a family is an exciting milestone, often filled with big plans and new responsibilities, but it can also bring uncertainty about the future. Exploring new parent life insurance early can help families prepare for changing financial needs as they welcome a child. Having financial protection in place can help families feel more prepared to address essential living expenses, childcare costs, and long-term needs can still be covered if a parent were no longer able to support the family. Because coverage is typically less expensive when you’re younger and healthier, buying life insurance early can be a practical step for growing families.

Life insurance for stay-at-home parents is especially important, as it helps ensure the working parent can continue to maintain their job, cover childcare expenses, and keep the household running smoothly even if the parent caring for the children is no longer there. Other benefits of life insurance include helping fund future costs such as education, extracurricular activities, and long-term financial goals, allowing a family to plan more confidently for the years ahead.

Benefits of life insurance for family protection and financial preparedness

Stay-at-home parents play a critical role in running a household from managing daily routines and childcare to cleaning and handling meals. While these contributions often go unpaid, their financial value is significant, and replacing them could be costly for the loved one left behind. One of the most important benefits of life insurance for family protection is the added sense of financial preparedness that comes from knowing your partner and children are supported. This is why new parent life insurance is often considered an important part of early family planning. Here are several advantages of life insurance and how having coverage can help ease financial worries about the future.

Cost of living

The main benefit of life insurance is to provide a death benefit to beneficiaries in the event of your passing. These funds can help keep your family financially stable by covering everyday expenses such as mortgage or rent payments, utility bills, groceries, car payments, and home maintenance costs. Receiving a payout from a life insurance policy can make a significant difference in helping your family maintain their standard of living during a difficult time.

Debt

Should you pass away, the death benefit from a life insurance policy can help pay off or significantly reduce outstanding debts, such as the mortgage, car loans, credit card balances, or student loans, helping to ease the financial burden on loved ones. By helping cover these obligations, a family can maintain their standard of living without having to make difficult sacrifices during an already challenging time, like selling a home or dipping into retirement savings. Putting life insurance in place for family protection also helps build a financial buffer that helps cover expenses without being forced to take on additional debt.

Childcare expenses

Childcare costs can be a major expense for families, costing around 10% of a married couple’s median income and about 32% of a single parent’s income. If a stay-at-home parent passes away, children will still need supervision while the working parent is on the job, as well as transportation to school, medical appointments, extracurricular activities, and other daily commitments. Having life insurance for stay-at-home parents can help cover the cost of a caregiver or nanny and ensure children receive the care and support they need during the day.

Home costs

For a surviving parent, keeping up with household tasks like cleaning, grocery shopping, and cooking can become a significant challenge. While a partner may be able to handle some of these responsibilities, additional help is often necessary. Buying life insurance for your family can provide a way to hire cleaning services, pay for meal delivery, or secure other support to help run the household.

Mental support

Following the loss of a loved one, a family may face a challenging adjustment period, both emotionally and financially. Life insurance for families can help ease this transition by providing funds to cover essential support services, such as grief counseling, therapy, or other emotional support for children and adults. It can also give your partner the flexibility to take time off work without worrying about lost income and help them focus on coping and spending time with family.

Cost of final expenses

Funeral and final expenses can be a significant financial burden. According to the National Funeral Directors Association, the average cost of a funeral with a viewing and burial is $8,300. A life insurance policy can help cover these costs, including funeral arrangements, burial or cremation fees, and other related expenses. By removing the worry of how to pay for final expenses, life insurance helps your loved ones to focus on grieving and honoring your memory without added stress.

Inheritance

While a life insurance policy can provide funds to support children in the future, minor children cannot legally receive life insurance payouts directly. To help simplify the process and avoid legal complications, it is important to name an adult beneficiary, such as a partner, or establish a living trust to manage the inheritance. This ensures that funds are available for long-term needs, such as education or other major milestones, while helping support long-term financial stability for the family.

How much life insurance is needed for a stay-at-home parent?

Determining how much life insurance a family needs starts with looking at a variety of factors, including outstanding debts, everyday living expenses, and long-term financial goals. For a stay-at-home parent, coverage should also reflect the real value of the work they do each day, including childcare, tutoring, bookkeeping, and family logistics.

In fact, a recent study estimated that the combined cost of childcare, household management, transportation, and other unpaid work performed by stay-at-home parents would add up to a six-figure salary if those services had to be replaced. While every family’s situation is different, a common rule of thumb is to consider coverage equal to five to ten times the value of a stay-at-home parent’s annual contributions to help ensure those needs can be covered.

Mental support

Should you pass away, your family may face a difficult adjustment period, emotionally and financially. Life insurance can help make that process a little easier by helping pay for such things as grief counseling. It can allow your partner to take time off.

What is the best type of life insurance for families?

Choosing the right life insurance coverage for families depends on individual needs, priorities, and budget. Two common options are term life insurance and permanent life insurance. Term life insurance is typically the most affordable option and provides coverage for a set period, such as 10, 20, or 30 years. This can be a practical choice for families who wish to cover final expenses, day-to-day costs, or other major financial obligations while raising children.

Permanent life insurance provides coverage for your entire life as long as premiums are paid. This type of policy usually costs more than term life insurance because it may include a cash value component that can grow over time. This option may make sense for families who want lifelong coverage and added financial flexibility to support long-term goals such as estate planning, caring for a dependent with lifelong needs, or building cash value that can be used later for emergencies or supplemental income. Exploring each option in more detail can help families make informed decisions and choose the life insurance coverage that best fits their needs and goals.

North American offers tailored life insurance for stay-at-home parents and families

North American offers a range of life insurance and annuity products to help support stay-at-home parents and families at every stage of life. These personalized solutions can provide financial protection, help replace lost income, and support long-term savings and planning goals. To learn more about the advantages of life insurance and how annuities could fit into your overall retirement plan, contact a North American agent today. 

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