Because we often talk about HLV as a multiple of income, this leaves a considerable demographic out of the conversation: non-working spouses. Many families choose to have a spouse at home for various reasons—to homeschool kids, save on daycare costs, and much more. Just because these spouses don’t earn an income doesn’t mean they don’t have a Human Life Value from an insurance standpoint. There are just different ways to go about this conversation. Life insurance on a stay-at-home mom or dad is just as important as life insurance on their working counterpart, if not more so.
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Life Insurance on a Stay-at-Home Mom or Dad
When you think about the most fundamental purpose of insurance, it’s to replace something of value if it is lost. Car insurance replaces your car, home insurance replaces your home, and life insurance replaces your life. Of course, life insurance cannot actually replace a human life, so instead it approximates the value of a human life. This is why HLV calculations involve income—it’s an attempt to solve a person’s earning potential, in case it needs to be replaced. That way, if the insured dies the next day, their family has income enough to replace the next 30-50 years or so.
In practice, many people don’t insure themselves up to their HLV because the numbers seem outrageous. As financial experts, we know that money has to stretch over decades, with inflation. Yet, many people under-insure themselves regardless. Instead, they consider how much debt they have, and often only buy enough insurance to cover that sum. This is a short-sighted approach.
Similarly, it’s short-sighted to believe that life insurance on a stay-at-home mom or dad is unnecessary. If you asked a client how valuable it is that his wife stays at home with their young kids, what do you think he’d say? It’s probably pretty valuable. Not only is she replacing childcare, but she’s also likely adding some educational benefits, meal planning and preparation, housekeeping, etc. These are all services that you could pay for that she’s doing for “free.” If she were to pass away tomorrow, how well would your client fare? In addition to his grief, he would likely have to take time off work to figure out how to manage all the tasks his wife was accomplishing. More than likely, in order to return to work, he’d have to start paying for some of those services—cleaning, childcare, tutoring, etc.
Calculating Human Life Value Based on the Value of a Stay-at-Home Mom or Dad
When you think of the value of a stay-at-home mom or dad in this way, it becomes apparent—life insurance is necessary. There would absolutely be a monetary loss to the family in the event of death. And while money can’t replace a human, it can give a family the space and time to grieve without the burden of financial stress.
If you have a client who is a stay-at-home spouse, calculating HLV begins by assigning value to the tasks that they do. For example, the value of a stay-at-home mom, as we’ve established, may include the following:
- Childcare
- Education
- Housekeeping
- Meal planning and prepping
- Driving services (to sports, school, and extra-curriculars)
- Tutoring
Then, consider the value of those roles. The average starting salary for a teacher is $42,000. The average housekeeper’s salary in the US is about $29,000. Childcare workers earn about $29,000 annually. You can see how these roles begin to add up, and a non-working spouse may be doing all of this and more.
According to recent data from Adzuna, the value of a stay-at-home mom or dad is $185,060. This is the sum of all the work that parents do in their 24/7 roles. And this is a perfect example of how you can help clients calculate their HLV, even if they don’t earn an income. There’s absolutely value in being a stay-at-home parent.
How Much Life Insurance for a Stay-at-Home Parent?
Now that we have a baseline income, let’s actually calculate what the value of a stay-at-home mom or dad would be in the insurance world. How much life insurance for a stay-at-home parent? If you simply input this income into Maximum Potential over 30 years (assuming the spouse is 35), you’ll see that the HLV is over $5.5 million dollars. That means a $5.5 million death benefit.
For a non-working spouse, that’s a pretty incredible number. And that’s how valuable it really is. If your client had the misfortune of losing their spouse, this $5.5 million would guarantee that they have time to stay home with the kids until they can hire help, or otherwise figure out how to do life without a key member of the family. This is the power of the death benefit. What’s more, any excess could be rolled into new policies for the kids to help for their college (or a business venture) someday.
This doesn’t all have to come from whole life insurance, either. Simply knowing the value of a stay-at-home mom or dad allows your clients to take the first step and get insurance, no matter the size of the policy. Then, they can use term insurance to supplement that policy and reach full HLV.
Learn More About HLV and Maximum Potential
Want to learn more ways to calculate and discuss Human Life Value with clients? Interested in becoming more proficient with the Maximum Potential calculator? Join us for a 3-day, in-person Truth Training event. You’ll learn the ins and outs of each Truth Concepts calculator, as well as how to use them with clients for optimal results. We’d love for you to join us at our next event.
To learn how to advance your practice in precarious markets and through an emotional recession, read our article about how to introduce whole life insurance as a safe wealth builder for your clients.