Life Insurance for Homemakers: learn what your family would pay for your services if you pass away.
You only need life insurance to replace income, right? The spouse that stays home to take care of the kids, clean the house and cook the meals doesn’t need to be covered because he or she doesn’t draw an income, correct? Wrong.
Staying at home to raise children and take care of the housekeeping is a noble, if undervalued, endeavour, and while the job doesn’t come with a salary, it has a very high value. (70K per year according to a life insurance underwriter)
The role of the homemaker used to be automatically regulated to women. In 1976, Canada had 1.5 million families with one stay-at-home parent, with just 1.43 per cent of those parents being the father. However, by 2015, roles had shifted dramatically. More women were in the workforce, as evidenced by the drop to .5 million families with a stay-at-home parent, and the percentage of the father being the one at home jumped to a whopping 10 per cent!
When it comes to valuing the role of the homemaker, it isn’t an outdated issue of “women’s work” vs. “men’s work.” It all comes down to real dollars and a whole lot of common sense.
Using Statistics Canada’s most recent census data, more than three million households have a total of four or more people. From a financial standpoint of a family with two adults and two children living in Vancouver, this means the homemaker is providing child care valued at $870 (preschool) – $1,215 (infant/toddler) per month for daycare, and $60+ per hour for house keeping.
The average Canadian family spends $241 per person on groceries, and the homemaker’s time to prepare those groceries into meal at minimum wage is 12.20/hour. Let’s say it takes an hour to prepare and serve dinner five nights a week (perhaps the family eats out or the other spouse and kids prepare the food on the weekends). That puts just dinner prep at over $200 month conservatively – and that doesn’t account for the time it takes to make breakfasts and lunches either.
Statistics Canada puts the total number of unpaid domestic chores at an average of 13.8 hours per week for women and 8.3 hours per week for men. The same reports notes an average of 50.1 unpaid hours of child care performed by women in the home and 24.4 hours for men.
Let’s do the math: 13.8 hours of chores + 50.1 hours of child care weekly = 63.9 hours of unpaid work. Now take that 63.9 and multiply it by minimum wage and you get the value of $779.58 per week, which is well over $3,000 per month, and close to $40,000 per year.
But remember, if a household had to pay for child care, the value may be higher than $12.20 per hour, so the value of that unpaid work is much greater in some provinces. Hence the 70K/yr underwriting valuation.
What happens if the uninsured homemaker passes away unexpectedly? Financial chaos.
The average Canadian earns a pre-tax salary of $49,500 per year. In a family, the home maker is contributing upwards of $40,000 per year. Now ask yourself this: Can your family manage financially without the contribution of the homemaker?
The average Canadian household carries $20,759 of consumer debt, which means this number does not include a mortgage. To pay off that much debt in five years at 8 per cent interest (note that credit cards typically charge much more interest), the family has to pay $418.15 each and every month. That’s more than $400 a month to service debt before a bill gets paid, gas gets put in the car or groceries go in the fridge.
Unless a family is debt free and has robust savings or helpful friends and family that are willing to cook, mind the children, clean and maintain the house and yard for free, the passing of an uninsured homemaker means a very serious, life altering hit to the budget. It can, in fact, put a typical family into poverty or bankruptcy.
Here’s the scary truth: a standard Canadian family would need more than $40,000 per year to cover the services of the homemaker and service existing debt, while not acquiring any more debt, to maintain a basic standard of living. You do not want to be in this position.
The question of whether a homemaker should be insured is answered with a clear and resounding yes. It’s simply what is best for your family, and at such affordable rates, it doesn’t make any sense at all to ignore this important coverage.
Term insurance coverage of $500,000 for 10 years for a 30-year-old non-smoking female living in British Columbia ranges from $18-$23 per month ($276 per year on the high end) across Canada’s top underwriters. That includes funds to cover the period of time when the children need the most care and when your family is the most vulnerable.
If your children are older, will be out of daycare sooner, and will be able to help with the household chores, you can get less coverage ($250,000 for $11-$20 per month, or $240 per year on the high end).
The importance of this cannot be stressed enough: pay $40,000+ per year to replace homemaker services or pay $276 per year to protect against this risk.
With numbers like these, why would anyone say no to coverage for the family’s homemaker? There are no excuses. If the homemaker is in poor health and will not qualify for traditional coverage, he or she can pay just a little more for a simplified or guaranteed issue policy that is designed to cover those with preconditions.
The value of the homemaker goes far beyond keeping the family unit together and functioning smoothly. The homemaker saves the family thousands of dollars each month, and to ignore this and not provide that person life insurance is to put your family’s financial future at serious risk.
Don’t take that chance.
Speak with a broker today to learn how just a few dollars per month can mean the difference between carrying on with the same standard of life, or slipping below the poverty line.