There are many ways that people recommend figuring out how much life insurance you need. It’s a topic that we have spoken about on this site in great lengths. Often it includes a supplemental income portion where we are looking at a multiple of someone’s earnings and figuring out how much they would need to provide to replace the income into the home if they were to pass away. What happens though when you’re looking at a home where one of the parents stays home to raise a family? If a family member contributes very little to the bank balance why would they need insurance?
Let’s consider the role of a stay-at-home parent. Housekeeping, childcare, chauffeur and chef are a few of the titles that get associated with this role. If something happened to the person filling these roles there would definitely be a cost associated with it. Many sources estimate that if you were to try and pay someone to fill all of these roles you would land in the $150,000-$200,000 a year range. We should keep one thing in mind, if something happened to the stay at home partner we wouldn’t be in a situation where all of their tasks are outsourced. But some of them definitely need to be… Think childcare as an example. According to Statistics Canada the cost for one child for full time child care in Ontario is $677 per month for one child. In regards to life insurance, this needs to be taken care of so that the income into the household can continue.
The other thing that you really need to consider is how the loss of the stay-at-home parent would impact your family and your life. Does the idea of heading back to work right after a tragic family event sound appealing or would you rather have the financial freedom to take time with your kids and help adjust to the new reality of everyone’s life? Unfortunately the bills coming into your home won’t stop because your partner has died. If your income is the main source that pays these bills you won’t have much of a choice. Return to work or the lights go out isn’t the way anyone wants to be forced to deal with supporting their family when time together is really what’s needed. In a way, the income-earning partner needs to consider supplementing some of their own income to allow for leeway when deciding to go back to work.
Quite often life insurance’s role is to take financial pressure off the table when making decisions after the loss of a loved one. In a single income house this can be magnified. The loss of the non-income earning spouse doesn’t mean that the household finances continue as normal. When you return to work and what that looks like is a decision that is much easier to make when you are focused on your family’s well being, not that the bills are piling up and you need to go back to work.
You may want to reach out to one of our experienced life insurance advisors to get a better idea of how much life insurance coverage you should have in place for your family. We will help you understand the different product types, pricing and options. You may be quite surprised at how affordable term life insurance can be.