Monday, May 12, 2008

Insuring Mom (or Dad) the Homemaker

[Welcome Industry Radar readers!]
Some time ago, we discussed disability insurance coverage for stay-at-home mom's (in fairness, pretty much everything we'll discuss in this post is equally applicable to stay-at-home-dad's, too). As noted then, it's difficult to obtain, because it's well-nigh impossible to verify a loss of actual income in such cases. One alternative would be to consider a critical illness plan, and perhaps an accident plan. These would pay a lump-sum based on a diagnosis or injury, regardless of actual financial loss.
But what about life insurance on that stay-at-home-spouse (SAHS)? Recently, I had an interesting conversation with a prospect who had asked me about additional life insurance for her husband. At the time, he worked for a company which provided a modest amount of group life insurance, which "Jane" felt was inadequate. She asked me to run some numbers for "Joe," with an eye toward a more realistic amount. I did so, and have periodically checked back to see when (and if) they would be moving forward. After more than a year of this, I dropped it, since it was obvious that they didn't feel it was a particularly pressing problem (despite my best efforts).
Last week, Jane dropped by the office to go over her home insurance with my P&C colleague. I figured "what the heck," and asked if they would like updated figures for Joe. She answered that they no longer needed the coverage, since he had left that job to become a stay-at-home-dad. Since he wasn't contributing (directly) to the household finances, she said, he didn't need any life insurance.
Good point, right?
Not really: the cost of replacing a SAHS isn't measured in hard dollars coming in, but what it would cost to hire someone to provide all (or almost all) the services of that spouse. The day after Jane and I had our conversation, I saw this article, which puts the real value of those services in perspective:
Surprisingly, it wasn't the nature of the job(s) so much as the hours:
"The biggest driver of a mom's theoretical salary is the amount of overtime pay she'd receive for working more than 40 hours a week."
So what does Jane have to say about all this? Well, I forwarded a copy of the article to her, and will wait to see how (if?) she responds.
Meantime, if you (or someone you know) is a SAHS, perhaps it's time to review that life insurance portfolio. Right after the laundry's folded.
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