Do stay-at-home parents need life insurance? 

Mouthy Money Your Questions Answered panelist, Kathryn Knowles, answers a parent’s question on the pros and cons of life insurance if you’re not working.  

Q. As a stay-at-home parent, is there any point in buying life insurance? 

A. Absolutely. A lot of people think of life insurance as something to buy when you have a mortgage. For many, it’s essential because you want to make sure that if you die, your family can keep their home. 

But for a stay-at-home parent without a mortgage or any significant debts, you might wonder if there is any point in life insurance, after all you are not bringing income into the home.

However, whilst you are not bringing an income into the home you are saving a massive outgoing in terms of childcare costs, cleaning, household management and more. So you need to ask yourself, how would your family cope if you weren’t there?  

If you died your family would either need to hire help to do the things you used to do, or if you have a partner they might need to reduce their working hours and their income will drop, or they might stop working altogether.  

Figuring out how much life insurance you need can be tricky. When I assess someone’s need for life insurance the key things are if they have a mortgage liability and if they have dependent children.

Working or being a stay-at-home parent kind of comes later in the discussion as the need for life insurance is about whether there are people that rely on you, not what you do for a living. 

There are a few different options: 

• Term life insurance: a good guide is to take the annual household income and multiple it by 3, 4 or 5. This will give 3 years, 4 years, or 5 years’ worth of your household income in one big cash lump sum. You would then usually plan on the life insurance being active until your children are an age of independence, such as 21. 
• Family income benefit: despite the name this is actually life insurance and it’s an annual income to your family if you die. So it isn’t a big cash lump sum of money in one go, it’s spread out over time. 
• Waiver of premium: this is an add-on you can choose to pay extra for and basically means that if you become really ill, the insurer will keep your policy active but not take any premiums off you until you are better again. As a stay-at-home parent you will usually be assessed on your ability to complete certain tasks to trigger this benefit such as preparing a meal or walking a certain distance.   
• Value added benefits: most insurers offer these extras to life insurance for you, your partner and your children. It can be things like access to GP appointments 24/7 over video call, mental health support, nutritionists and more. I have three young kids myself and these have been an absolute godsend at times. 
• Children’s Critical illness Cover: none of us ever want to think about our children becoming ill, but it does unfortunately happen. With some insurers you can include what is known as children’s critical illness cover on your life insurance policy. This policy can pay you a cash lump sum if your child is diagnosed with cancer, or a number of other conditions, so that at a time when everything will be awful, you don’t have to worry about your finances. 

Everyone has completely different needs when it comes to life insurance. As a parent it’s usually a good idea to arrange life insurance to make sure that your children will be financially secure, until they are grown up. Remember, that as a stay-at-home parent you are often working just as harder, sometimes harder, than someone in an employed job. Don’t downplay your worth! 

Kathryn is a specialist adviser for personal, business and group life insurance, critical illness cover and income protection, within the UK and internationally. Kathryn provides training, videos and podcast that are used within the insurance sector, charities and the public, as a way to educate about ways to access insurance.

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