How much life insurance should stay-at-home parents buy? Here’s what Dave Ramsey recommends

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Stay-at-home parents should read this before purchasing insurance.


Key points

  • Purchasing life insurance is important for stay-at-home parents, and it can be difficult to determine how much coverage to purchase in these circumstances.
  • Ramsey suggests a term life insurance policy with a benefit of $250,000 to $400,000 for stay-at-home parents.

Purchasing life insurance is important so that your loved ones do not find themselves without money in the event of an untimely death. But there is a wide range of choice when it comes to death benefits, so it can be difficult to figure out exactly how much money beneficiaries will need.

Most experts who provide recommendations on how much life insurance to buy focus on income. In fact, the common advice is to buy enough coverage to replace between 10 and 12 times what the insured earns. But, those who earn an income are not the only ones who have to take out a policy. Stay-at-home parents should also buy protection.

The good news is that financial expert Dave Ramsey has some tips to help those staying at home decide how much coverage to buy.

What coverage do stay-at-home parents need?

Ramsey was very specific about the recommended death benefit amount for parents who don’t work outside the home.

“For stay-at-home parents, I recommend between $250,000 and $400,000 of term life insurance coverage,” Ramsey said. Ramsey thinks term life is appropriate for both stay-at-home parents and working people, rather than whole life insurance.

“With term life insurance, you can get the exact same amount of coverage for a fraction of the price of a whole life insurance policy,” he explained. While whole life insurance policies stay in effect indefinitely, term life insurance policies end after a set period of time, such as 20 years. But most people don’t need forever coverage. “You’ll be covered with your investments after 20 years, and you won’t even need life insurance anymore,” Ramsey said.

Now, it might seem strange to think that a stay-at-home parent needs a policy at all since those who don’t work outside the home don’t bring in an income. But their surviving relatives could still face financial hardship after they die if there isn’t enough life insurance coverage in place. “They may not earn the income of a 9-to-5 job, but they bring HUGE value to their homes,” Ramsey explained. “Replacing even a part of that wouldn’t be cheap.”

Life insurance taken out by a stay-at-home parent could cover costs such as daycare or a nanny, or could allow the parent who is currently working to reduce their hours to be home with the children more often.

How to buy a cover

Stay-at-home parents should consider how long their loved ones will rely on their services when determining a coverage term. And they will have to decide how much their death benefit will be. Ramsey’s recommendation is a good starting point, although more coverage may be needed if the working parent wishes to switch to stay-at-home in the event of an untimely death.

After deciding on the amount of coverage, the next step is to shop around and get quotes from multiple insurers, then submit a claim to the one that offers the most coverage at the best rate. The insurer may require a medical examination and will ask health questions as part of the application process. Once this is done, coverage can be put in place so that the family has the financial protection they need.

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