Under most circumstances, you need life insurance to protect your surviving family, who depend on your income. The overwhelming majority of Americans are drastically underinsured in the event of premature death.
Buying life insurance for a stay-at-home parent is useful, too. Although it doesn’t protect the family from their loss of income, it can help offset the additional costs that it would take to replace that stay-at-home parent’s services. For example, replacing the services of a stay-at-home mom caring for a 3-year-old and a newborn would cost $30,000 per year or more to hire a full-time nanny until the kids are in school. In addition, the children would need after-school care for several more years, and you might need a number of other domestic services, too. All these expenses add up to $250,000 or more of life insurance needed on the stay-at-home parent.
Fortunately, term life insurance is quite affordable, presuming that you’re fairly healthy. The cost of a high-quality, 20-year level term life insurance policy on a young mother may cost $300 to $400 per year — a level premium for 20 years!
