Stay-at-home spouses need insurance, too

Many husbands and wives who don’t earn a paycheque think insurance is a waste of money. Yet if they die, their working spouses will be scrambling to cover funeral costs, not to mention many new expenses.

Your job is to show them the value of what they do. I ask stay-at-home clients to estimate what they think they should earn an hour. They usually guess low, and think a $100,000 life insurance policy is enough. It’s not—$1 million is more realistic.

To show why, I ask what they accomplish in a typical week—a day alone isn’t representative. And once they realize the scope, they see their initial estimate was too conservative.

I also explain $100,000 invested at today’s low return rates won’t last long, especially when it has to fund all the jobs they do.

Read: Tomorrow’s parents

Once they’re on board with the concept of life insurance, discuss the type and duration. A lot of non-working spouses say, “I only need it for the next 20 years. I can’t see needing it after my kid is grown.”

Yet after those 20 years, I’ve heard clients say, “I’ve paid into this and I’d like to leave my child some life insurance, no matter how old he is.” So even if young parents can only afford term life insurance this year, I revisit the discussion periodically.

Read: You need a Plan B

What’s mom worth?

A 2011 Salary.com survey determined the average stay-at home mom “earns” $115,000 a year.

Each week she works as:

• A DAYCARE TEACHER 13.2 hours
• HOUSEHOLD CEO 3.9 hours
• A PSYCHOLOGIST 7.6 hours
• A CHEF 14.1 hours
• A HOUSEKEEPER 15.4 hours
• DOING LAUNDRY 6.6 hours
• A PC-OR-MAC OPERATOR 9.5 hours
• A FACILITIES MANAGER 10.7 hours
• A JANITOR 7.8 hours
• A CHAUFFEUR 7.8 hours
• TOTAL: 96.6 hours per week

Source: Salary.com

Some eventually purchase a permanent policy for legacy purposes. Insurance is never a one-time need because life doesn’t stand still. Kids keep growing, a spouse might take a part-time job, or the couple might get divorced.

Critical illness

Non-working spouses don’t qualify for disability policies, but they can purchase critical illness (CI)—another type of insurance they often refuse to buy.

A parent will naturally worry about who will look after her children after she dies, but what if she lives but gets a disease that prevents her from looking after a household either temporarily or permanently?

Read: Growing into your life insurance

One of my clients, who had life insurance but not CI, was diagnosed with breast cancer and was temporarily sidelined while taking chemotherapy. Her workplace benefits only covered a ratty wig, and she came to me in tears.

I took her to a place I knew that sold beautiful wigs, and she was able to find one that suited her. But she had to pay the cost difference herself.

A lump-sum payment from CI would have paid for not only that wig, but also someone to take her to treatments; a caregiver to look after her kids while she recovered; and other unanticipated expenses.

Read: Make insurance pitch a family affair

Once clients understand the importance of insurance, we find the ideal combination of life and CI, then adjust it downward if affordability is an issue. No one should be insurance-rich but cash-poor.

What about dad?

An average stay-at-home dad did work worth $60,127 in 2011. Another statistic shows a working dad’s at-home salary was $33,858 above his work salary.

Golda Brown member, Top of the Table and partner at Al G. Brown & Associates.