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Life insurance for stay-at-home moms

About 5 million stay-at-home moms across the United States buy groceries, cook dinner, help with homework and do many other daily household tasks.

Yet many of these millions of moms are going about their everyday jobs without a financial safety net: They're not covered by life insurance.

Financial experts say that's short-sighted. While a stay-at-home mom may not be bringing home the bacon, it's a pretty safe bet that she's buying it and frying it.

“Stay-at-home moms have the need for life insurance because there are economic losses in the event of their death, in addition to the great emotional loss,” says Brian Ashe, treasurer of the LIFE Foundation, a nonprofit focused on educating the public about life insurance.

The 'value' of a stay-at-home mom

life insurance stay at home mom

Buyinga life insurance policy for a stay-at-home spouse often gets “pooh-poohed” by the breadwinner, says Michael Bonevento, a wealth adviser with Ameriprise Financial in Brielle, N.J.

“One of the most difficult discussions that I've had over the course of my 17-year career is to try to help the working spouse understand the monetary value of the stay-at-home spouse," Bonevento says.

So just what is the value of a stay-at-home mom? Each year, Salary.com releases a survey of what it would cost to pay someone else for the various services a stay-at-home mom provides -- in essence, her “salary." The 2010 survey calculated a yearly salary of $117,867 for the 10 most typical job functions. However, experts say $117,687 might be on the high side for determining the proper coverage amount for a stay-at-home mom's life insurance policy.

According to Country Financial, a $200,000 policy for a healthy woman age 22 to 50 would cost an estimated $15 to $30 a month. A $500,000 policy for the same woman would cost about $20 to $40 a month.

Gender differences

Jamie Imus, a financial representative at Country Financial, says there's a gender gap when it comes to buying life insurance for a stay-at-home spouse.

The husband of a stay-at-home mom tends to think he can rely on nearby family and friends to take care of the children if Mom were to be gone, Imus says. The dad usually fails to take into consideration the amount of time a stay-at-home mom works. According to the Salary.com survey, that time commitment is about 92 hours a week.

“It’s a fairly typical sentiment for the husband to think, 'I can take care of everything,'” Imus says. “The dollar amounts start to wake them up to, 'Gee, this would put a hardship on our family.'”

One dollar amount that's staggering: the cost of hiring a nanny if there's no longer a stay-at-home mom. A full-time nanny caring for two children from 9 a.m. to 5 p.m. makes anywhere from $300 to $1,000 a week, according to the International Nanny Association.

Imus says a mother who works outside the home understands the financial consequences and doesn't hesitate to suggest life insurance for the stay-at-home dad. “They realize right away the need for extra help,” Imus says.

Assessing the need

Still, believing in the need to buy life insurance for a stay-at-home mom or dad and actually buying policies are two different things. A 2007 Country Financial survey found 71 percent of stay-at-home parents thought both spouses should be insured, yet only 31 percent actually had life insurance policies for both.

Jim and Amy Doherty recently took stock of their life insurance needs after Jim's employer decided to transfer him and his family from Pennsylvania to Sweden. For the first time, the couple met with a financial planner who helped them revise their wills and told them Amy -- a stay-at-home mom -- didn’t have enough life insurance through Jim's employer. Amy now has a life insurance policy that fully values her at-home work as much as Jim's policy values his work at the office.

The financial adviser told the Dohertys to think of their life insurance in terms of income replacement, Amy says. If something happened to Amy, then Jim's ability to make a living would be severely hampered.

“A stay-at-home mom is so much the glue that holds the family together that if something happens to her, I think the rest of the family is going to be sort of lost for a while,” says Amy Doherty, a former financial analyst at the Federal Reserve Bank in Atlanta. “At least get enough (coverage) to get them through the crisis.”

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