The pandemic has not only raised awareness of the role of protection, but also housework and childcare responsibilities in a family.
Women and men were equally likely to say their caring and domestic responsibilities had increased since lockdown, according to research in May last year by King’s College London and Ipsos Mori. And three-quarters of advisers said clients were more willing to discuss protection than before the pandemic, according to 2020 research by provider Guardian.
However, there is often a misconception among clients and some advisers that there is a need to protect just the income earner, as the stay-at-home client ‘doesn’t work’, according to Jiten Varsani, mortgage and protection adviser at London Money.
Protection for stay-at-home parents raises a number of questions, says Naomi Greatorex, director at Heath Protection Solutions. These include:
- Who would help with the children if that parent was sick or died?
- Would the surviving parent need to take a prolonged period of time off work to look after the children, or their sick partner?
“Many people assume [the breadwinner will] just carry on, paying the bills as usual,” says Emma Thomson, head of protection and GI propositions at Sesame Bankhall Group.
However, the main breadwinner may need to reduce their working commitments or give up work completely, even for a temporary period, to spend more time at home and that will impact their earnings.
“While the stay-at-home parent might not be generating an income, their day-to-day activities supporting the family, such as childcare, household chores, and ferrying the kids around all have a cost that would have to be covered should they be unable to do them. Legal & General has historically estimated the ‘value of a mum’ to be around £30,000 a year,” she adds.
Clients also tend to focus on protecting the working parent when a budget is tight, says Greatorex, with the stay-at-home parent often feeling that the family primarily needs protection against the risk of losing income if that person is sick or dies.
But the difference that some protection for the stay-at-home parent can make, rather than none, is “huge”, she adds.
Legal & General, for example, offers a low cost option by limiting how long a monthly benefit can be paid. For a houseperson, the policy will end after the monthly benefit has been paid for the maximum benefit payment period of 12 or 24 months.
The role of a stay-at-home parent may not come with an official salary, but Clare Hannigan, business development manager at Owl Financial, also warns it is very likely there would be a severe financial impact on a family if a stay-at-home parent developed a serious illness, had an accident or was hospitalised for any length of time.
The average price of 50 hours of care a week for a child under two in nursery, for example, is £252.07 across Great Britain or £13,100 a year, according to a childcare survey last year by Coram Family and Childcare. Taking a stay-at-home parent out of the equation would mean this amount would have to be found for childcare at the very least.
Protection for stay-at-home parents
Providers that offer protection for stay-at-home parents are not a niche. In a survey of life and critical illness cover providers by FTAdviser, all could insure stay-at-home parents.
Five providers also offer income protection for people who are stay-at-home parents at the time of application, while nine offer income protection for policyholders who become stay-at-home parents during the policy.
Holloway Friendly is the only provider surveyed that does not offer income protection for stay-at-home parents at all. A spokesperson for the mutual says it is not an active decision made by the society, but a "hangover" from its historic position that is yet to be addressed.
| Provider | Life insurance | Critical illness cover | Income protection for people who are stay-at-home parents at time of application | Income protection for policyholders who become stay-at-home parents during the policy |
|---|---|---|---|---|
| Aegon | Y | Y | Y | Y |
| AIG Life | Y | Y | Y | Y |
| Aviva | Y | Y | N | Y |
| Guardian | Y | Y | N/A | N/A |
| Holloway Friendly | N/A | N/A | N | N |
| Legal & General | Y | Y | Y | Y |
| LV | Y | Y | Y | Y |
| Royal London | Y | Y | N | Y |
| Scottish Widows | Y | Y | N/A | N/A |
| The Exeter | Y | N/A | N | Y |
| Vitality | Y | Y | Y | Y |
| Zurich | Y | Y | N | Y |
“Stay-at-home parents may underestimate the financial value they add to their family, however it is important to have the [protection] conversation,” Owl Financial's Hannigan says.
“Ask a stay-at-home parent to talk through their usual day, then ask what would happen if they were not able to do it. The implications will change depending on the length of time, but the financial costs soon add up.”
Advisers have a duty of care to discuss protection with all clients, London Money's Varsani says. “The idea that we should only protect the earner is an old-fashioned notion. Client needs have changed.
“The stay-at-home client may return to work in the future. To take cover later could be more expensive with age, and if there are future changes in medical circumstances the cost of cover could be further increased or may not be available at all,” he adds.
Rose St Louis, protection director at Scottish Widows, agrees it is important advisers consider all types of family situations to make sure clients are adequately protected, including stay-at-home parents.
“The earlier that families which include a primary carer have these conversations to make sure that they are properly prepared for any unexpected occurrences in the future, the better.”
Chloe Cheung is a features writer at FTAdviser
