Life Insurance for a stay-at-home mother

More Australians than ever are seeing the benefits of holding life insurance, however many still think of life insurance as being something that only the main income earner of the household needs.

Of course life insurance is very important for the main income earner, as their loss can in many cases be financially devastating for any family.  Often the loss of the main income earner results in an immediate loss of cashflow to cover the day to day costs of living.

Without life insurance the family will have to rely on savings, which in most cases will not last forever.  Unless another family member can step up to the role of main income earner, the family’s financial situation will quickly deteriorate and may never fully recover.

But what happens when the person lost is not the main income earner?  In this case we are generally talking about the stay-at-home mother (or father), or a partner who perhaps works part time and contributes a smaller amount to the family’s finances.

Let’s take a look at what would happen if the stay-at-home mother was lost to the family, and how the family would be affected financially without life insurance.

In this case we’ll look at Tom and Sally, who have a young family with two sons and a daughter.

Tom worked hard and had a well paying job that he enjoyed.  Thanks to Tom’s income Sally was able to stay at home and look after their three children, all aged under ten.

With a young family Tom knew the importance of insurance, and held a large life insurance policy for himself that would assist his family.  Unfortunately, he had never thought that life insurance would also be important for Sally.

Despite living a healthy life, Sally was diagnosed with cancer at age 36, and sadly she lost her battle with cancer after just six months.

Although Tom enjoyed a decent salary, the family’s finances had taken a significant hit during Sally’s illness.  All of the family’s savings had been exhausted making sure that Sally’s final months were as enjoyable as possible, and their credit cards had also been hit hard for the same reason.

Their already shaky finances were then put under further stress having to pay considerable medical bills that remained outstanding, not to mention the significant costs involved with her funeral.

Tom’s income continued to roll in, and thankfully he could rely on assistance from friends and family to look after the children.  But as the months rolled on, this support continued to decline as people had to return to their own lives.

We all know that being a stay-at-mother is a full time job in itself, and even more so for a family with a couple of young children.  Tom spent a small fortune on child care, and worked as hard as he could to keep the family running, but it was wearing him down financially, emotionally and physically.

Without Sally having had any life insurance, things were very tough.  Of course the emotional effects of having lost Sally far outweighed any concerns over money, but the financial stress certainly didn’t help the situation.

Now let’s take a look at how things could have panned out differently if Tom and Sally would have taken out life insurance on both of their lives, instead of just on Tom’s life.

We already know that Sally had been diagnosed with cancer, but because it was diagnosed as terminal cancer Sally was able to claim on her life insurance straight away.

Although the life insurance could not save her life, it allowed the family to clear all of their debts immediately.  It also allowed Tom to take unpaid leave from his work so that he could spend more time with Sally and the family.

Sally still lost her battle with cancer after six months, but the family was able to enjoy her final months without any financial stress thanks to the life insurance.  In the early part of her illness whilst she still had good quality of life, the family took an overseas holiday to create some lasting memories together whilst they still could.

The funds also allowed them to fly in Sally’s parents from England, who otherwise would have struggled to afford such a trip.

Upon Sally’s death the life insurance covered all of the outstanding medical bills as well as the cost of the funeral.  There was also sufficient funds to allow Tom to take another month of unpaid leave from work to allow him to be with his children during this mighty stressful time.

Tom eventually returned to work when he was ready, and although by this stage there was not a huge amount left from the life insurance, there was enough to place into an account to go towards their children’s future education.

Tom still had to cover many costs after Sally’s death, but because Sally’s life insurance allowed them to pay out their sizable mortgage and car loan, he now had a large amount of additional income available each month.

This additional income allowed Tom to cover the costs of day care for the three children, as well as the cost of hiring a helper which took a lot of stress off Tom by taking care of the cooking and cleaning for two days each week.  Without life insurance this would not have been possible.

Of course the loss of Sally was still a huge blow for Tom, and life wasn’t going to return to normal anytime soon, but at least he could concentrate on the grieving process with his family without having to worry about financial matters.

As you can see, the difference to the family’s quality of life would have been dramatically improved if Sally would have held life insurance.  For Sally it meant she could spend more quality time with her finally over her final months, and it also gave her piece of mind to know that her children would not be financially disadvantaged due to her death.

Life insurance cannot save your life, nor can it make up for the loss of someone else’s life, but it certainly makes things easier when you can remove all financial stress from what is already a very stressful time.