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The Companion Advisor: Insurance
Insure a stay at home parent

From the Canadian Association of Insurance and Financial Advisors (CAIFA)
A Companion Advisor Article

In many Canadian families one parent will opt to stay home to look after the children, usually when the children are under the age of two or there is more than one child. It's often a financial trade-off for young couples - whether to spend money on daycare or struggle along on one income.

This is one of life's transitions and a good time to get some financial advice from a member of the Canadian Association of Insurance and Financial Advisors (CAIFA), such as Fiscal Agents. There are several long-term financial repercussions to consider.

The first concern is whether the family can survive on one income - some financial advice may help you change your lifestyle to live within a restricted budget. Remember that couples with a single income are taxed more heavily than those who split their income. The parent who quits a job to stay with young children loses RRSP contribution room for the time that he or she is out of the workforce. That can be addressed by using spousal RRSP contributions.

What about life insurance?
A parent who leaves a salaried job with benefits often loses life insurance coverage. So couples are left with the decision - should we insure a stay-at-home Mom or Dad?

Some yearly costs of replacing a stay-at-home parent

Daycare (child under age 5) $7,500

Daycare (school-aged child) $3,000

Housekeeper (once per week) $5,200

Babysitter (if you work shifts) $9,200

Take-out meals (once per week) $1,500

For example, stop and consider the value of what Mom contributes to your family when she is at home. She may not be generating an income but she is saving you both of bundle in daycare costs, housekeeping costs and peace of mind. If she died, it would cost $30,000 or more each year to hire a nanny or to replace what she does with daycare and a housekeeper.

A stay-at-home Dad also saves money on shopping around for clothes and food, Dad's taxi service to hockey and ballet lessons and home-cooked meals. He provides the opportunity for his working partner to get on with the job, as someone is there to help with homework or to care for sick children.

Young families on one income are often stretched for case but life insurance is not a frill. It may be possible to carry on a group policy from a former employer or to find insurance that meets your budget. Sit down with your Fiscal Agents insurance advisor to try to find a policy that you can afford and let them show you how a combination of mortgage insurance and term insurance can protect your family if one of you dies.

This article is reprinted with permission from the Canadian Association of Insurance and Financial Advisors (CAIFA), www.caifa.com.

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