Why Stay-at-Home Parents Should Consider Life Insurance Even if They Have No Income

Often, consumers are told to buy life insurance to replace their income -- but what about stay-at-home parents who don't have earnings?

Life insurance is a very important purchase. For consumers buying coverage, the common advice is to buy a policy with a large enough death benefit to replace 10 to 12 times their annual income. 

This advice could make it seem, at first glance, like stay-at-home parents do not need a life insurance policy. After all, parents who do not work outside of the home have an income of $0 so that would mean their death benefits would be $0 if it's calculated based on a multiple of their earnings.

In reality, however, it's very important for those who stay home with their kids to have life insurance, even if they don't have outside earnings. Here's why. 

Life insurance can help cover the costs incurred when a stay-at-home parent passes

The ultimate purpose of life insurance is to protect surviving loved ones from a major decline in their standard of living when someone passes away. Often, this means replacing the income the deceased is no longer providing so the bills can continue to be paid without that paycheck coming in.

But in the case of a stay-at-home parent, they may not have been getting a paycheck but they were providing very valuable services. Parents who stay at home provide childcare, which can be extremely expensive. They also typically help the household in many other ways, from providing assistance to aging parents to cooking meals so dining out isn't necessary to running errands for a working spouse.

If a stay-at-home parent passes away, all of these tasks will still need to be done. And in many cases, that either means the other parent will need to cut back on work and take a pay cut or that professionals will need to be hired or both. And this can be a huge drain on the budget of the surviving family members. 

Life insurance can be purchased to provide funds to help cover the costs of these services or to make it possible for the other parent to spend more time at home with the kids during a difficult time of grief. It can also help cover the funeral costs and final expenses for the parent who has passed, to ensure that these additional expenses do not become another burden for a family coping with disaster.

Income matters, but it's not the only factor that determines if life insurance is needed

Life insurance is undoubtedly important because it serves as a form of income replacement, and can provide money that a deceased person would have otherwise brought into the household if an untimely death had not occurred.

But it's important to look beyond what a person earns when deciding whether they should have a life insurance policy. Anyone who has people depending on them should have life insurance, as should anyone who wants to make sure they don't burden surviving loved ones with covering their funeral costs.

Buying a policy can provide very affordable protection, and it can help ensure that those who are left behind are cared for in the best way possible. That's well worth doing for most people, even if they don't earn a lot of money.