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Why stay-at-home parents need life insurance

By Marcus Pickett

According to the U.S. Census Bureau, there were 5.3 million stay-at-home parents in 2009. That means roughly one out of six married couples with children under the age of 18 had a parent staying home.

While these households may acknowledge the huge role that stay-at-home parents play in their families' day-to-day-lives, they may underestimate the need to purchase life insurance for them. The death of a stay-at-home parent can leave a family extremely vulnerable and can place a financial burden on the surviving spouse. Being a stay-at-home parent is a full-time job, as the saying goes, and a life insurance policy with a comparable death benefit often is needed to cover the gap in responsibilities that's created in the aftermath of such a tragedy.

Unexpected hardships

Couples who stop to think about the consequences will quickly understand why it's so important that a life insurance policy covers both parents. Should something happen to the stay-at-home parent, the surviving spouse soon would find himself or herself as the primary income earner and the primary child care provider, while also coping with the loss. Too often, families fail to plan for this unexpected hardship; it's just not something most people like to think about.

In 2008, the average cost of full-time child care for an infant was $15,895 a year, while part-time care for a school-age child was $10,720 a year, according to the National Association of Child Care Resource and Referral Agencies.

It's impossible to know exactly how a widow or widower will cope with the loss of a spouse, not to mention the reaction of the children. Maybe the greatest need will be the replacement of lost income, as the surviving parent may need to take a leave of absence from work. Indeed, these various costs and outcomes are important to consider in determining the size of the life insurance policy. It may be best, for example, to plan for a certain period of lost income, in addition to a number of years of child care costs.

Affordable life insurance

According to a report from LIMRA, individual life insurance is at a 50-year low, with only 44 percent of U.S. households currently holding individual life insurance policies. It's not hard to guess why -- the same report noted that more than 40 percent of Americans say that other financial priorities are a major reason they haven't bought more life insurance.

No doubt, balancing current needs with future risk is a tough task for families. One option is a joint life insurance policy, which means the death benefit is paid out at the first death only. Compared with single life insurance, premiums still will be higher as the likelihood of a making a claim effectively doubles, but this type of policy is significantly more manageable than dual policies. Of course, it's important to consider what will happen in the event both parents die, but a single death benefit may be enough to provide guardians who assume responsibility for the children with the extra financial support they need.

Don't assume that the only purpose of life insurance is to cover lost wages. Life insurance is about financial protection and peace of mind in the face of possible tragedy. In this respect, deciding the best way to guard against financial hardships after the death of a stay-at-home parent should be a high priority.

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