Stay-at-home parents should read this before buying insurance coverage.
- Buying life insurance is important for stay-at-home parents, and it can be difficult to determine how much coverage to buy in this circumstance.
- Ramsey suggests a term life policy with a benefit of $250,000-$400,000 for stay-at-home parents.
Buying life insurance is important so loved ones aren’t left without money in the event of an untimely death. But there’s a wide range of choices when it comes to death benefits, so it can be hard to figure out exactly how much money beneficiaries will need.
Most experts who provide recommendations for how much life insurance to buy focus on income. In fact, the common advice is to buy enough coverage to replace between 10 and 12 times what the policyholder earns. But, those who earn an income are not the only ones who should buy a policy. Stay-at-home parents should purchase protection as well.
The good news is that finance expert Dave Ramsey has some tips to help those who stay at home decide how much coverage to purchase.
How much coverage do stay-at-home parents need?
Ramsey was very specific about the recommended size of the death benefit for parents who do not work outside of the home.
“For stay-at-home parents, I recommend between $250,000 — $400,000 worth of term life insurance coverage,” Ramsey said. Ramsey believes term life is appropriate for both stay-at-home parents and for working individuals, rather than whole life coverage.
“With term life insurance, you can get the exact same amount of coverage for a fraction of the price of a whole life insurance policy,” he explained. While whole life policies remain in effect indefinitely, term life policies end after a set period of time, such as 20 years. But most people do not need coverage forever. “You’ll be covered with your investments after 20 years, and you won’t even need life insurance anymore,” Ramsey said.
Now, it may seem odd to think that a stay-at-home parent needs a policy at all since those who don’t work outside of the home do not bring income in. But their surviving loved ones could still face financial hardship after their death if there’s not sufficient life insurance coverage in place. “They may not make the income of a 9 to 5 job, but they bring a HUGE value to their household,” Ramsey explained. “…….