Life Insurance Tips for Grandparents Raising Grandchildren

Ross Quade | Children | 13 Oct, 2015 | No Comments

Granparents caring for grandchildren

There are many grandparents in the United States that have taken the responsibility of raising their grandchildren. One survey by AARP found that 11 percent of grandparents in the United States were looking after at least one of their grandchildren on a full-time basis. This figure increases to 13 percent for Latinos and 19 percent of African-American grandparents. Additionally, the average age of a grandparent looking after their grandchild was 69 years old. Close to half of the surveyed grandparents made less than $50,000 annually.

The Statistics

Most people believe that the later years of life are the time to pursue individual interests and hobbies. However, survey results depicted a much different picture. The AARP survey found that 37 percent of grandparents contribute to the living expenses of their grandchildren. Additionally, it found that 23 percent of grandparents pay for their grandchildren’s dental and medical bills. It also found that 53 percent of grandchildren contribute to the educational expenses of their grandchildren and that 40 percent spend over $500 on their grandchildren over the past year for holidays and birthdays.

Grandparents Putting Their Grandchildren First

In the economy that we live in today, grandparents are often required to take control of many more financial responsibilities than they had to previously. The AARP survey also uncovered that 44 percent of grandparents said they had to make a change in the amount of money they spend on themselves due to the added responsibility of looking after their grandchildren. This indicates that many grandparents are putting their grandkids over their needs.

Life Insurance For Grandparents

If you fall into the bracket of being a grandparent who is raising their grandchild, then one thing you must consider is obtaining a life insurance policy. Whether you are looking after one of your grandchildren or have a full household, it is an extremely savvy move to buy a life insurance policy. As a grandparent, you must assume a substantial amount of financial responsibility to ensure that your grandkids are raised in a comfortable manner. Due to this, you must think about what will occur if something were to happen to you and your spouse.

The Importance of Life Insurance

On average to raise a child from birth to 18 years old, you need to spend $300,000. This number jumps up to $500,000 if you help them attend college. If you want to retire eventually, then the means of replacing these assets can be tricky. Luckily, with life insurance you can replace these assets in an extremely cost effective way, which makes it a definite necessity. Life insurance is a crucial aspect of raising your grandchild; especially if you want to see them succeed down the road.

Consider Permanent Life Insurance

If you are raising your grandchildren and want to purchase a life insurance policy, then there are a few things you have to keep in mind. For one, there is a vast array of insurance policies out there, and so you should not make the mistake of purchasing term coverage, simply because it is cheap. As a grandparent, you’d likely find permanent life insurance to have the most benefits. Namely, permanent life insurance comes with a death benefit in which the beneficiaries will receive a tax-free income stream.

Consider Equity Indexed Universal Life Insurance

This is another kind of life insurance that you may want to look into as a grandparent. It is a permanent life insurance product that earns interest solely on the upswing of the stock market index. This type of life insurance has been gaining popularity in the last few years as people search for where to invest their money. You can utilize the cash value of this type of policy to pay for your grandchildren’s large expenses like college tuition, as you’ll have tax-free distributions, as well as savings returns.

Look Into Term Life Insurance As an Option

If you do not believe you can afford a life insurance policy or are not responsible for fully raising your grandkids then a term life insurance policy is also an option. Make sure that you take into consideration how much life insurance coverage you’ll need to cover your beneficiaries effectively. A term policy can make a life insurance policy extremely affordable, and so even if you do not have an insurance policy yet it is not too late. Moreover, term life insurance can easily be customized to your particular needs.

Consider Naming a Trustee

You should avoid leaving the benefit of your life insurance policy directly to your grandchildren if they are minors. Rather, consider naming a trustee or a contingent beneficiary who can act as the recipient for them. If you leave the policy straight to your grandchildren, then the benefit may not be able to be accessed until it is processed in court, which can take quite a long time. You may also want to consider setting up a family trust and place your selected trustee in charge.

Getting Recognized as Caregiver

A unique challenge that many grandparents face as a caregiver is getting their local and state governments, schools, and communities to recognize their role as caregiver to their grandchildren. Although acquiring the legal guardianship of your grandchildren can be an emotionally and financially burdensome ordeal on its own, gaining benefits like financial assistance, emergency care, healthcare, and social security benefits can be a whole other problem. This is because you must have proof of a legal relationship before being able to gain access to such benefits. If you are not technically the legal guardian of your grandchildren, then you’ll likely not have any luck doing so. Luckily, a life insurance policy can lessen the burden of the absence of these benefits.

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