Insurance for Homemakers with No Income

Published: September 24, 2019

There’s a myth that only the breadwinner of the house needs life insurance. But what if the stay-at-home spouse were to pass away or become seriously ill or injured?

It’s important to think about the financial implications should the homemaker no longer be able to fulfil their daily duties — for example, cooking and cleaning, childcaring, laundry and grocery shopping.

The cost of replacing the duties performed by the non-working spouse can put a severe strain on your finances. Consider the type and amount of life insurance that you'll need should something happen to you, the homemaker.

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Does a stay-at-home spouse need life insurance?

Yes. It's doubtful that the primary breadwinner would be able to maintain their current income and take on the extra responsibilities should the stay-at-home spouse no longer be capable. The payout from life insurance for a stay-at-home mum or dad, could be the safety net that helps your family cover the cost of hiring someone to look after the home and children, thus enabling the primary income earner to continue working.

Consider the possible expenses below and decide whether insurance for your non-working spouse is needed:

  • Childcare costs, for example, paying for day-care or a nanny,
  • Preparing meals,
  • Running errands, like grocery shopping,
  • Cleaning and doing laundry,
  • Serving as the family chauffeur,
  • Scheduling appointments and home organisation,
  • Decorating and home improvement projects.

If the homemaker dies unexpectantly, hiring someone to complete their daily tasks could cost a significant amount of money.

Also, without the stay-at-home parent, the income generating spouse might no longer be able to travel for work or put in longer hours, which might diminish their chances of promotion.

Who is eligible for homemaker’s insurance?

Life insurance companies understand that taking care of the home is equally as important as earning an income, especially when you have small children. Generally, insurers will help you mitigate the financial loss by providing homemakers insurance when you're aged between 18 and 59, depending on the provider, and a permanent resident of Australia.

How much life insurance does a stay-at-home parent need?

The amount of coverage the non-working spouse should purchase depends on the approximate costs that will be incurred from the loss of someone performing their duties. The cover amount should ideally offset these costs, plus:

  • Clear any outstanding debts,
  • Cover any medical costs incurred,
  • Pay for your children's future education,
  • Cover funeral arrangements.

If a third party was hired to do the domestic activities and childcaring you're looking at an average annual salary between $34,703 and 57,964 (Payscale, Australia September 2019).

However, your insurance company might limit the amount of coverage available to the stay-at-home spouse as it's not easy to quantify their contributions. You might want to request quotes from some of Australia’s major insurance brands to compare which one meets your requirements.

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Buying life insurance

Generally, there are various policies available to the non-working spouse, including:

Term life cover: Pays out a lump sum benefit to your beneficiaries in the event of your death or diagnosis of a terminal illness.

Trauma insurance: A lump sum benefit is paid to you when you suffer one of the critical illnesses listed in the insurer’s product disclosure statement (PDS).

Total and Permanent Disability (TPD): Provides a lump sum amount should you become totally and permanently disabled due to an accident or sickness. Generally, you might be able to get TPD on the definition of home duties. Home duties TPD means the benefit is paid when you are unable to continue performing all regular home duties — for example, cleaning the house, caring for dependent children and preparing meals.

Can you take out a policy on your spouse?

Yes, you generally can buy life insurance for your spouse, but they would need to consent by completing the duty of disclosure section on the application form. You'll then be the owner of the policy and pay the premiums, while your spouse will be the insured person.

Can a homemaker get income protection insurance?

Select retail life insurance companies in Australia do offer a specific type of policy to the non-working spouse that may assist as some form of income protection. This policy type is usually referred to as a Living Expense Cover. A monthly benefit will usually be paid should the stay-at-home spouse be significantly disabled due to an injury or illness.

For a living expenses insurance policy, significantly disabled generally means you can’t perform two or more of the activities of daily living, including:

  • Getting dressed and undressed,
  • Eating and drinking,
  • Using the lavatory,
  • Bathing and showering,
  • The ability to move around and get in and out of the bed, chair or wheelchair without the assistance of a walking aid,
  • Suffering the loss of intellectual capacity and needing continuous care and supervision.

Examples of home duties income protection insurance

Insurer and Policy name Entry age Expiry age Included benefits
BT Insurance Protection Plans
General Income Protection
17 to 59 Your policy will be reviewed on or following your 80th birthday.
  • Severe disability benefit
  • Recurrent disability benefit
  • Death benefit
  • Extended cover benefit
You can also apply to add children’s cover on your policy for an additional fee.
OnePath OneCare
Living Expenses Cover
19 to 75 for stepped premiums Your policy anniversary when you are 80 years old.
  • Waiver of premium
  • Death benefit
  • Specific injury benefit
Source: BT Insurance Protection and OnePath OneCare 2019 PDS

If you or your spouse is a homemaker and want life insurance or income protection, please contact an insurance broker to help you find a policy that meets your requirements and budget.

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