First let me say at the outset: it's impossible to put a value, a measure of financial worth, on someone's life.
The very idea sounds cold, compassionless – mercenary, even.
That said, it is surprising how often we find ourselves doing something along those lines.
In the world of work, we place a value on someone's contribution to the cause, in the salary we choose to pay them.
And with life insurance, we measure the value of someone's contribution – or the impact of losing of that contribution – in the amount we insure their life for.
It's an evaluation of how big a financial hole the loss of a main earner would leave behind.
What about partners who don't work full time, such as a stay-at-home parent (#SAHP)?
How big a financial hole would they leave?
It's a harder question to answer, but as we'll see, one that's worth trying to figure out.
Pricelessness… and pricefulness.
A part-time or non-working partner such as a stay-at-home parent makes an absolutely priceless contribution to the household.
So how do we come up with a value to insure their lives for?
Most people have no idea how much work a so-called “non-working” partner does, or what it's really worth
For a full-time earner, it's fairly straightforward to decide how much life insurance you need. You'd look at the value of your mortgage, if you have one, to make sure that gets paid off. Then you'd look at your salary after tax and decide on a reasonable multiple that should cover your dependents for a number of years after you're gone.
But for parents who spend most of their time taking care of the home and children, the calculation is much more difficult.
This is because stay-at-home partners are:
- Undervalued. Most people have no idea how much work a so-called “non-working” partner does, or what it's really worth.
- Overlooked. When it comes to protecting your family, it's all too easy to think only in terms of who makes the biggest financial contribution – but what about all the other ways to contribute?
So what is the value of a stay-at-home parent, and how can you make sure your family has the right amount of cover?
To help you answer this question, we're going to look at the ways in which a stay-at-home partner is both priceless, and priceful.
Let's look at those in reverse order.
Pricefulness: How staying at home is undervalued
Think about some of the key material tasks a stay-at-home parent carries out, and then consider how much it would cost to pay someone else to do it.
Important note We're not at all suggesting the first thing you would do is go out and replace your partner with services from another person or agency. This is also not intended as an accurate gauge of how much life cover you should buy, simply a way to highlight the contribution of a stay-at-home partner.
Here are some examples…
Sending a child under two years old to nursery for 25 hours per week now costs an average of £115.45, according to the Family & Childcare Trust, which amounts to over £6,000 per year. In reality, a SAHP likely spends many more than 25 hours caring for your children. Assuming they sleep for eight hours a night (wishful thinking perhaps?) and you help out when you're not at work, your partner probably does around £254 worth of childcare per week. That's £13,208 a year so far.
An alternative to nursery is an au pair, a young person who lives with you and helps with childminding. How much could that cost? Babycentre suggests you would need to pay them at least £80 for 30 hours of work a week, and you also provide room and board. So that's an outlay of £4,160 a year, and their upkeep would increase your food spending and utility bills. And the value of the accommodation provided? A casual look at Gumtree suggests the rent on a single room in the Bristol area averages around £450/month (£5,400/year). Obviously it's difficult to estimate the food and utility cost, but it's clear this is by no means a cheaper option.
Our running total so far: up to £13,208.
Running the household
As well as looking after children, most stay-at-home partners tend to do the lion's share of household jobs like shopping, cooking and cleaning. If you wouldn't have the time to do this yourself, you'd need to consider paying someone else to do it.
First, cleaning. A domestic cleaner usually takes around three hours to clean a three bedroomed house. To pay them the living wage of £7.85 an hour outside London, you're looking at about £23.55 per week. That's £1,225 a year, although in reality your partner probably spends longer than three hours a week cleaning the house.
Let's add in a bit of laundry service. I used the White Knight Laundry Services price list as a reference: it's pretty complex, but the minimum order value is £12.68 a load. How many washes a week? A browse through some parenting forums reveals a huge variance between families, but it seems fair to assume a minimum of five washes. So that's £63.40 a week – another £3,296 a year.
Now to the kitchen. How much work does it take to feed the family? According to mychefonline.co.uk, hiring a family cook costs £150 a day. At the lower end, a cookery school graduate would set you back £100 a day. So let's use that lower figure and assume the SAHP cooks around half of the week, with you pitching in the rest of the time. £100 × 3.5 × 52 adds up to another £18,200 a year.
Our running total has now reached £35,929 a year.
That's before we add in any allowance for the many other tasks and errands that are part of good household management.
When you add up all this unpaid work, it's clear that a stay-at-home partner contributes a significant amount of “task value” to the household.
However, the reality of losing your partner would be more complex than simply paying someone to do all the work they used to do.
Pricelessness: How would you cope without your stay-at-home partner?
When you're working out how best to protect your family financially, you need to give some thought to how your family life would change if you lost your partner.
If this should happen, it's hard to contemplate simply going back to your job full time, and paying someone else to look after your children. You'd almost certainly need to stop working for a while, possibly for a year or more, and would need some money to tide you over during this time.
If you did keep working, you'd probably need to reduce your hours, and would need to think about paying for childcare as we've already mentioned – not just for the time you're working, but also for when you need a break.
Your partner is irreplaceable, but having a financial safety net in place could prove to be a lifeline for your family at a difficult time.
How to protect yourself and your family
Ultimately, it's important for both partners to have some level of life cover. Yet in a straw poll of our friends and colleagues, only half of those with stay-at-home partners have arranged life cover for both parties.
The reasons are complex, but mostly it boils down to those two factors discussed above: either their unpaid work has never been properly valued, or the impact of possibly losing them one day has been overlooked.
So if you have a stay-at-home partner, the key question is: is their life insured?
If you're reading this, chances are you have a solid job and employee benefits such as death in service cover; or perhaps you've arranged term life insurance for yourself. Either way, your partner would receive a cash lump sum to provide for them, secure the family home and tide them over.
Now it's time to think about you. What would you need if their contribution was taken away?
Like you, they are ultimately priceless. But with a rough estimate figure placed on value of their work, you could make a start and find out prices for a certain level of cover. Fortunately it is fast and straightforward to find out how much this would cost.
If you would like to use our example figures to get you started:
The £35,929 from our examples above is an annual value. To get a sensible amount of life insurance, multiply this by a number of years – five might be reasonable – and you're looking for cover that would pay out £179,645.
If you would like to build a quote from scratch:
You could consider a few other things such as whether you would want the mortgage paid off, how much extra you might want to put aside, and whether you would want to claim in the event of critical illness. Answer this question to get started with the quote builder:
Compare life insurance prices
If neither of your lives are currently insured, you'll need to decide whether you want two single policies, or joint life insurance that covers you both. The main thing to be aware of with a joint policy is that it will only pay out once, on the death of the first partner.
Getting some cover in place is easy to do, and comparing prices is the first step: you can see quotes onscreen in under 60 seconds, just by entering a few key details about your lifestyle.
Do you agree that stay-at-home parents are undervalued and overlooked? Tweet us your comments to @YourWealthUK