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A special challenge facing these grandparents is that state and local governments, communities and schools may not formally recognize their role in raising their grandchildren. While acquiring legal custody and guardianship of a grandchild may be financially and emotionally burdensome, grandparents should be aware that many benefits, including healthcare, emergency care, financial assistance and social security benefits, require proof of a legal relationship before they will help. Proof typically includes court guardianship papers or adoption papers.
To help grandparents raising grandchildren better understand their insurance needs, the National Association of Insurance Commissioners offers tips and considerations regarding auto, home, health and life insurance.
Auto Insurance Considerations for Raising Grandchildren
- You will likely assume additional chauffeuring responsibilities when caring for your grandchild and his/her friends. Consider increasing your liability insurance to make sure you are covered in case of an accident. You may also want to consider purchasing a Liability Umbrella Policy to protect your assets.
- If your grandchild is old enough to drive your car, make sure to name him or her as a secondary driver on your policy. Be prepared to pay higher insurance rates as teens are considered a higher risk. You may want to recommend listing them as an insured since an insured has more rights under a typical auto policy than a listed driver. The drawback, however, is that a claim check may have all the insureds listed as a payee.
- Many auto insurance companies offer lower insurance rates for teenage drivers who complete driving courses and maintain good grades. Check with an agent about the most cost-effective way to secure coverage.
Home Insurance Considerations for Raising Grandchildren
- When caring for a grandchild and his/her visiting friends, consider increasing your liability coverage through an umbrella policy in the event that someone is injured on your property. Remember that backyard items, such as a trampoline or pool, may require an increase in liability coverage.
- Keep in mind that if your adult grandchild rents from you, he/she might not be covered under your standard homeowners policy. Contact your state insurance department to find out what is covered and if a renter’s insurance policy might be needed.
- Your grandchild may be eligible for government health programs. According to the AARP, a grandparent can apply for a grandchild to be covered by Medicaid or State Children’s Insurance Program in any state. Most states do not take grandparents’ income into consideration when applying for a grandchild’s health benefits. Check with your state insurance department to find out if your grandchildren qualify.
- If you are still working, contact your human resource department and health insurance company to find out whether your grandchild is or can be covered under your policy. You will likely have to prove that you have legal guardianship of the grandchild in order for your insurance provider to accept him/her as a dependent child.
Life Insurance Considerations for Raising Grandchildren
- If you do not have a life insurance policy, consider purchasing term insurance - life insurance issued for a limited period of time. Term policies are less expensive than whole life policies, but keep in mind that most companies will not sell them for a term that ends past your 80th birthday.
- Never leave a life insurance benefit directly to a minor child; instead make sure the policy names a contingent beneficiary or a trustee who will act as a beneficiary on behalf of the child. Otherwise the life insurance benefit may not be accessible to the child until the issue is processed through court. You may want to set up a family trust with your selected trustee in charge.