Why women need life insurance

Having the right life insurance policy can give moms a peace of mind knowing their families will be taken care of if the worst were to happen

By Ryan Daly

Aug 20, 2015 @ 11:53 am EST

Studies show that nearly 70% of households with children would have trouble meeting everyday living expenses if a primary wage earner were to die. In 40% of homes in the U.S., that person is mom. iStock

Here's a terrifying statistic: According to the U.S. Census Bureau, 800,000 people are widowed each year, leaving behind families stricken with grief and financial hardship. Approximately 70% of U.S. households with children under the age of 18 would have trouble meeting everyday living expenses within a few month if the primary wage earner were to die.

Life insurance is designed to provide individuals peace of mind knowing that, should the worst happen, their families would be protected, at least from financial struggles.

In our research, we found that only 40% of women in the U.S. have life insurance, and women average smaller amounts of individual life insurance coverage than men. On average, women have $129,800 of individual life insurance to men's $187,100.

That could be trouble for the more than 40% of homes where mothers are the primary breadwinners, and the more than 60% where the mother brings home at least 25% of the family's earnings. But what about stay-at-home moms? In 2014, there were 5.2 million stay-at-home moms nationwide.

In addition to their salaries, mothers typically contribute a significant number of services with financial value to the family. A recent Crain's Wealth article, for instance, pointed out that families typically spend between 7% and 15% of their income on child care, and that weekly nursery and preschool expenditures for children five years old and younger rose almost 50% between 1990 and 2011 after adjusting for inflation. Stay-at-home mothers provide an alternative to enrolling their children at expensive care centers.

A recent survey showed that stay-at-home moms would earn, conservatively, $117,000 per year for just the tangible services they provide — activities like cooking, cleaning and caring for their children. The same survey found that working moms render $71,860 per year worth of services on top of their annual salaries. Nothing can replace the love and caring that a mother provides her family, but without a robust life insurance policy, it's unlikely that her family could even replace the basic services that she performed for them.

For single mothers, the stakes are astronomically higher — 83% of single parents are mothers.

Single mothers are often in the position of trusting a close friend or family member to care for their children should a tragedy occur. Raising children is expensive, especially if you weren't prepared to take them on. Life insurance can provide single moms with the confidence that they'll provide caretakers the resources they need to guarantee a bright future for their kids. Yet, 70% of single parents don't have life insurance.

Life insurance isn't a controversial product. Nearly everyone — 85% of consumers — agrees that they need life insurance. Yet, only 62% of consumers say they have life insurance, and of those who do, more than 40% think that they don't have enough. Without a proper safety net in place, women leave their families at risk.

Ryan Daly is a research analyst at ConsumerAffairs.

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