Many families take out life insurance to cover the main breadwinner should they pass away. After all, it’s their salary that pays the bills and keeps a roof over everyone’s head. But what about the vital role of the parent who stays at home to look after the kids?
Preparing for the worst
If the stay-at-home parent passes away, the surviving parent, previously the main earner, could be forced to cut back on their working hours or pay someone else to take on everything from childcare and cleaning, to cooking, housekeeping and chauffeuring.
If you stop and think about everything a stay-at-home parent crams in, it soon adds up! If it was a paid role, the mum or dad could earn roughly £12.51 an hour, according to calculations by Childcare.co.uk, a website for childcare providers and parents. Given the 24/7 nature of parenthood, those wages tot up to nearly £109,000 a year. That’s why it’s vital to consider life insurance for both the stay at home and working parents.
The benefits of life insurance
The money from a life insurance policy can never replace a mother or father. But it can help lift the financial burden at a distressing time, removing money worries from a grieving family. The payout could help fund funeral expenses, cover day-to-day living costs or clear a mortgage. It could make sure your children continue their education, whether supporting them at university or funding school fees. It can buy time for the remaining parent to spend with their children.
Start by thinking about how much you might need, and how long for. You can choose the amount covered and the length of time using policies known as ‘term insurance’. So for example, you might want cover that continues as long as your children are likely to be living at home.
The good news is that life insurance doesn’t have to bust the family budget. The younger and healthier you are, the cheaper the monthly payments, known as ‘premiums’, are most likely to be.
Alternatively, you might consider family income benefit life insurance. If a parent passes away, this provides a regular monthly income until the end of the policy, instead of a single lump sum. The drawback is that if you die towards the end of the policy, it would pay out less in total.
Whatever life insurance option you choose, you may want to consider writing the policy in trust. This means that any payout reaches your nearest and dearest promptly, when needed most, rather than getting delayed by probate. Putting the policy in trust also means it won’t be subject to inheritance tax.
Don’t worry, it needn’t be complicated or expensive - your life insurance provider can help you do this, or you can seek the assistance of a financial adviser or solicitor (services provided by financial advisers and solicitors may incur fees, so it’s worth checking any costs upfront).
No-one wants to think about dying. But life insurance cover can give parents the peace of mind that their family will be protected financially if they die while covered.