Should I Get Life Insurance as a Stay-at-Home Parent?

Sean McGinn is an assistant director of Product Position in the Risk Products department at Northwestern Mutual.

Life insurance can provide financial protection for your loved ones should something happen to you. But because life insurance death benefits are often viewed as a replacement for lost income, there’s often a misconception that you don’t need life insurance for a parent who isn’t working.

But even if a parent isn’t collecting a formal paycheck as a stay-at-home parent, they’re providing valuable services that would need to be replaced if they weren't around. In their absence, the surviving spouse and family members would be left with a significant financial burden.

Here’s why life insurance for stay-at-home parents is so important.

The financial impact of losing a stay-at-home parent

Perhaps the greatest responsibility of a stay-at-home parent is childcare. A newly widowed working spouse would likely have to find childcare right away, and it could add up to a big expense. American families spend anywhere from 8.9 percent to 16 percent of their median income on full-day care for a single child, according to the U.S. Department of Labor. Families could spend an average of up to $343 per week on daycare..

And then there are the countless household duties that stay-at-home parents typically take the lead on. From grocery shopping to cooking to scheduling doctor appointments, a suddenly single parent could have many new tasks on their plate that they may have to outsource. That could add a lot to the family budget.

A stay-at-home parent’s life insurance death benefit can help cover these costs—potentially for as long as your children are living at home, depending on the policy. The money can also help pay for immediate costs like funeral expenses, which according to the National Funeral Directors Association, was about $7,848 in 2023. Your policy payout could also go toward bigger things you were hoping to help your children with in the future.

How much life insurance does a stay-at-home parent need?

Since stay-at-home parents don’t technically earn an income, determining the right coverage amount can be tricky. Ideally the death benefit would be able to cover projected childcare costs for little ones and before- and after-school care costs for older kids. Take the long view and assume that these bills will be in place until children turn 18.

You’ll also want to estimate costs associated with housekeeping, home maintenance and future financial goals you want to help kids with, such as saving for college, paying for a wedding or buying a home.

From there, consider the insured person’s age, debts and expenses when determining how much life insurance you need. When comparing insurers, look beyond the death benefit to understand how a new policy could work with your overarching financial plan. For example, if you opt for a permanent life insurance policy, it will accumulate a cash value, in addition to providing valuable death benefit, that you can draw on as needed throughout your life—which could provide financial flexibility in the future.

Life insurance options for stay-at-home parents

Let’s unpack the basics of how life insurance works. When you purchase a policy from an insurance company, you’ll make regular premium payments to keep your policy active. Should you pass away during your coverage period, your beneficiaries will receive a death benefit. There are two basic types of life insurance.

• Term life insurance. You’re covered for a predetermined time. Every policy is different, but common periods include 10 or 20 years, or until age 80.

• Permanent life insurance. As long as you pay your premiums, you’ll be covered for life. This type of policy costs more than term life insurance for the same death benefit, but there are other perks. Your policy will accumulate cash value over time. While taking out a life insurance loan will reduce your death benefit, it can be an easy source of cash to help with other financial goals.

The biggest draw of having life insurance is that it can provide your family with financial peace of mind. This is reason enough for stay-at-home parents to consider getting a policy. If the death benefit is all you think you need, term life insurance may be enough. With that said, permanent life insurance has extra advantages that could help strengthen your family’s long term financial plan.

With whole life insurance, for example, you’ll accumulate cash value that is guaranteed to grow and isn’t subject to market declines. Having access to this pool of money can help shield you from market volatility and strengthen your overall financial health. It can also help you cover a financial emergency if you’re in a pinch.

You might also consider buying life insurance for your children. Doing so could protect their insurability in the future. Securing a policy while they’re young and healthy can help you lock in a low premium for life. If they do encounter health issues down the road, they’ll already be insured. A child’s life insurance policy can also build cash value that grows tax-deferred over time. They might use those funds to eventually pay for their wedding or purchase their first home.

Your financial advisor can help. Together, you and your advisor can build a plan rooted in what’s important to you. Your advisor can help you understand your insurance needs and how your different financial tools can work together to grow and protect your money and reach your goals.