Stay At Home Parents Life Insurance

You’re probably aware that a parent who works outside the home would most likely require life insurance to cover their loved ones in the event of their death. Stay-at-home parents, like breadwinners, require coverage as well. Here are nine of the reasons why.

To compensate for the worth of their labor. 365 days a year, stay-at-home moms are caregivers, tutors, cooks, housekeepers, chauffeurs, and so much more. And all of that effort comes at a cost: According to Salary.com, stay-at-home parents provide the equivalent of $162,581 every year to their households. If the unthinkable occurred, the surviving partner would be liable for a raft of additional expenses that the stay-at-home parent had previously borne. Term life insurance is a quick and inexpensive method to receive this kind of coverage for a set length of time, such as 10 or 20 years—often until you pay off your mortgage or the kids are grown and gone.

To account for any future income contributions. When their children are older, many stay-at-home parents return to work. Life insurance could help cover the difference between what their future earnings would have contributed to the home.

To repay any debt. There are numerous ways to owe money, ranging from student loans to credit card debt to an informal loan from a family member. Life insurance can assist in settling any debts left behind so that they do not cause burden to grieving loved ones.

To cover funeral costs. Would you think that, according to parting.com, the average funeral costs between $7,000 and $10,000? That may not be enough to cover the cost of the funeral, headstone, and other charges. Many families wish to honor a loved one’s memory but cannot afford to cover all of the expenses. Fortunately, a life insurance payout can help cover final requests.

Leaving a legacy If a stay-at-home spouse has a strong affinity for a place of worship, alma mater, or another nonprofit organization, life insurance benefits can be used to make a significant philanthropic gift.

To increase savings. Permanent life insurance, which provides everlasting protection as long as premiums are paid, may provide extra living benefits such as the potential to accumulate cash value. This money can be used for anything in the future, from a down payment on a house to college tuition. However, keep in mind that withdrawing or borrowing funds will reduce the cash value and death benefit of your policy if not repaid.

To ensure insurability. Your health can deteriorate in an instant. Purchasing a permanent life insurance policy when you are young and healthy ensures that you will have coverage for the rest of your life. Then you won’t have to be concerned if you subsequently develop a health problem that makes it difficult, if not impossible, to obtain life insurance.

To profit from tax-free benefits. Life insurance is one of the few options to leave money to loved ones that is tax-free.

To provide loved ones with peace of mind. Losing a parent or partner before their time is difficult enough without having to worry about unpaid debts, childcare fees, burial expenditures, and other expenses.

As you can see, life insurance is just as vital for stay-at-home parents as it is for working parents. Make an appointment with an insurance specialist in your area to learn about your options and obtain coverage that matches your lifestyle and budget.

 

Who Can I Name as a Life Insurance Policy Beneficiary?

First and foremost, congratulations for purchasing life insurance! You took a critical step by protecting those you care about.

 

You must name a beneficiary on every life insurance policy. A life insurance beneficiary is the person or individuals who get the proceeds of your life insurance policy when you die; it could also be a trust, charity, or your estate.

 

You can also specify more than one beneficiary, as well as the amount of the payout that should go to each one—for example, 50% to a spouse and 50% to an adult child.

 

Typically, you’ll be prompted to select two types of beneficiaries: primary and secondary. If the primary beneficiary dies, the payout is distributed to the secondary beneficiary (sometimes known as a “contingent beneficiary”).

 

Providing for Children

One of the main reasons people buy life insurance is to pay for children who are left behind. Typically, this is accomplished by declaring the surviving husband or partner who cares for and raises the children the beneficiary. But what if you’re widowed, or worse, both you and your partner die at the same time?

To begin, it is not a good idea to name a minor as a beneficiary. This is because the law prohibits life insurance payouts to anybody under the age of majority, which varies by state and ranges from 18 to 21. If a kid is named, the case is sent to probate court. The court will appoint a guardian to oversee the kid’s money/estate until the child reaches the age of majority.

 

Fortunately, there are two alternatives. The first step is to appoint an adult custodian. The custodian should be someone you can rely on to spend the money on necessities like as housing, health care, and education until the child reaches the age of majority. Any residual money is then passed over to the child, who can spend it anyway they see fit.

 

The second alternative is to consult with an attorney about establishing a trust. The trust is the beneficiary in this case, and a trustee is appointed to manage and distribute the funds. The fundamental benefit of a trust versus naming a custodian is that you have more control.

 

A trust allows you to specify how you want the money distributed—even if your children are adults. (A word of caution: If you’re creating a trust for a special needs child, you should definitely check with an attorney. They can assist you in developing one that will not affect your child’s eligibility for government assistance such as Medicaid or Supplemental Security Income.)

 

Choosing a Charity

Do you have a cause that is close to your heart? If this is the case, you should think about choosing a nonprofit organization as the beneficiary of your life insurance policy.

 

There are various approaches to this. They include naming the charity as a beneficiary on a new or existing life insurance policy, making the charity the owner as well as the beneficiary of a life insurance policy, adding a charitable-giving rider to a life insurance policy, or collaborating with a community foundation to determine the best way to distribute a payout.

 

Conclusion

Consider carefully naming your estate as a beneficiary. This can result in the lengthy and costly legal process known as probate. Designating certain individuals or groups as beneficiaries is a faster and more efficient method.

 

Be precise. Instead of “my spouse” or “my children,” provide their names, residences, and Social Security numbers as beneficiaries. This saves the insurance company a lot of time because they don’t have to look for information.

Always include a contingent beneficiary in your will. If you die without a surviving beneficiary and leave life insurance behind, the payoff may go to someone you never intended to benefit from your policy. It may also be necessary to employ a court-appointed administrator to straighten things out.

Select dependable custodians and trustees. Consider who you’d put your child’s financial well-being in the hands of if you weren’t there. Your children may adore their uncle or aunt, but is he or she financially mature and responsible? If not, find someone who is.

Review your beneficiaries on a regular basis. It’s a good idea to check your beneficiaries once a year and following important life events like marriage, divorce, childbirth, or death in the family.

Express your desires. Let your beneficiaries know your intentions and how to find the insurance.

Be watchful of unusual circumstances. Some circumstances may result in a tax on the life insurance benefit, such as when the policyholder and the insured are not the same person. Similarly, if you live in a community property state and do not name your spouse as a beneficiary, things can get complicated. An insurance agent can provide you with life insurance guidance on this and other topics.