Have you thought about insurance for your kids?

Have you thought about insurance for your kids?The social changes that have occurred over the last 40 years and the economic conditions that we experience today have created a unique situation for 45 to 65 year olds. Caught between the twin pressures of ageing parents and dependent children, they can rightly claim to be the ‘sandwich generation’.

They may be better known as baby boomers – that cohort of the population who were born post-war and have grown up in a generally prosperous era. While they may have benefited from such things as an increasing emphasis on retirement saving and the capital appreciation of the family home during their lifetime, many of them are now confronted with some unique financial challenges caused by the generation either side of them.

On the one hand there is the growing trend for children to remain dependent for a longer period than in days gone by. This has resulted from the high costs facing young people who want to establish an independent life for themselves, the need for greater education to ensure a career path and the tendency to marry and have children at a later age.

The other ‘slice of bread’ in the sandwich that these baby boomers are caught in is the challenge of ageing parents who may become reliant on their children for care. Medical advancements mean that the older generations are living longer, which in some cases may mean they run out of funds to care for themselves. Naturally, the sandwich generation feel a responsibility to take on this burden.

Normally, as you approach the latter stages of your working life, you would be looking forward to perhaps spending a little more on yourself for things such as travel, a better car, home renovations or entertainment. The demands of being care providers to the generations above and below you however, may mean this welldeserved freedom has to be postponed.

Beware the sandwich doesn’t become a ‘triple decker’

If you are in the sandwich generation, one of the key issues that can easily be overlooked is the potential financial threat of a third generation becoming dependent on you as well. Your children may be at an age where they are having children of their own and will therefore incur all the costs of raising a family. This in turn means that an immense liability is created if your children become unable to care for their offspring due to sickness, injury or even premature death.

If this was to happen there is a reasonably strong chance that you would need to pick up the tab for the ongoing support and care of your grandchildren, if no financial protection was in place. This means you need to consider what action you can take to remedy the situation before it becomes a problem.

Consider how you dealt with the prospect of disability or premature death when you were raising a young family. You no doubt sought advice about how to limit that liability through life and disability insurance, in order to pay out the mortgage and other debts, as well as providing a lump sum to invest to generate an ongoing income for the family. Are your children addressing this situation in the same way? Do they have a financial adviser who can help assess their risk management? Are they even aware of the potential disaster that may be around the corner?

Will you inherit this liability?

If your adult children do not have the proper protection in place then there is a very real chance that you will be left with the responsibility of making up the financial shortfall if disaster strikes them. This leaves you two possible courses of action to remedy the situation.

The first is to strongly encourage them to seek financial advice and have the extent of their financial liabilities assessed and insured. To that end, Hall Finance and Insurance Solutions advisers would be happy to follow up on any introduction or recommendation that you give to your children. They will then have the benefit of the same professional assistance that you have received. In addition to their insurance planning, we can also assist them with any superannuation or investment needs to further enhance their financial security.

The second option is for you to take direct action to mitigate the risk that may default to you if your children are uninsured. This effectively means you initiating and paying for the cover for your children, in case they are unable or unwilling to do it themselves.

The policy proceeds can then be used to provide financial protection to your grandchildren and to help insulate you from any financial impact that may otherwise be passed on to you.

Many people find the latter option attractive because they have the financial resources to help their kids out and they like the idea of providing something of much higher potential value than simply handing out cash for everyday spending.

When you think about it, providing this kind of financial support and security could end up being the greatest gift you ever give your children and grandchildren. If you would like to investigate this further, then we would be happy to discuss the options.