It’s not unusual today to find people who are either currently caring for, or supporting, an aging parent, or expect to in the near future.
If that’s you, you’re not alone. But have you ever thought about what would happen to your parent if something unexpected happened to you? Where would the money come from to continue their care and who would provide it?
The cost to hire an outside caregiver can be significant. According to the 2016 Genworth Cost of Care Survey, the national median cost runs $46,332 annually, or about $3,861 per month, for a trained and certified home health aide who would assist an elderly individual in their home with personal hygiene care, exercise, light household duties, and meal preparation and who would monitor the individual's condition. That’s about half the cost of a private room in a nursing care facility. It’s not cheap, by any means.
A life insurance policy on your life can be your answer to providing the money necessary to hire that caregiver if you die prematurely. It would provide the money at exactly the moment it is needed.
To determine how much coverage to buy, look at the estimated cost to hire an outside caregiver and how long your parent is expected to live. Using the figures from the study above, with the monthly cost at $3,861 and assuming your parent expected to live about another 10 years, you would need a policy of at least $463,320 to cover the expected cost ($3,861 x 12 months = $46,332 x 10 years = $463,320).
As to what type of coverage to purchase, a universal life or whole life policy would be best because it provides the appropriate coverage for as long as it is needed and does so at a level, budgetable cost. Once the parent needing care has died, the coverage can either be continued for other financial needs or cashed in, as your needs may be at the time. If cost is a determining factor, a term policy could certainly be used initially to cover the need, but eventually, the term policy will become more expensive, which might cause you to drop the coverage right when it is needed most.
One other factor to consider is that it would be best to make a trust the beneficiary of the life insurance policy in order to guarantee that the care will be provided as you wish. You wouldn’t want to make the parent the beneficiary because they may not remain competent to make financial decisions on their own as they age. A properly designed trust can solve that dilemma.
It’s a complicated world today. Talking with a professional insurance agent can help you navigate these care worries and reach a solution that can help bring you peace of mind and fit in your budget. You–and your parent–deserve nothing less.