Life insurance when you care for elderly parents

The sandwich generation carries an unusual concentration of risk. You are typically in your forties or fifties, still working, still supporting children, and now also underwriting a parent’s care in time, money or both. Two households depend on your capacity to keep earning, and that capacity is exactly what most people in this position have not insured properly.

The insurance instinct usually runs in the opposite direction. People start researching cover for their parents — funeral policies, over-70s products — and never get round to reviewing their own income protection, which was set up fifteen years ago against a salary that has since changed. Meanwhile the caring itself is reducing their hours, which quietly reduces what an indemnity income protection policy would pay if they claimed.

There is also a category error worth naming. The costs people fear most in this situation — residential care, home support, the erosion of a parent’s savings — are governed by New Zealand’s means-testing rules for care subsidies, and are not something a life insurance policy is designed to address. Insurance answers the death and disability questions. The care funding question belongs with a lawyer and the relevant agency.

On your own cover

1. 1Review your income protection against your current income and, importantly, your current hours.
2. 2Check whether reducing hours to provide care would reduce a claim under an indemnity policy.
3. 3Make sure trauma and TPD cover reflect the fact that two households now rely on you.
4. 4Check your life cover is sized against what your children and your parents would both lose.

On your parents’ affairs

1. 1Confirm enduring powers of attorney exist for both property and personal care, and that they are activated correctly when needed.
2. 2Find out what cover they already hold. Old policies are frequently forgotten and occasionally substantial.
3. 3Check that any existing policy is still being paid and that the insurer has current contact details.
4. 4Establish whether the estate could meet funeral and final costs without a forced sale.
5. 5Get legal advice on wills, trusts and care subsidy rules before restructuring anything.

These are the details that decide whether the cover does what you expected. Read them before you compare on price.

• Whether your income protection is agreed value or indemnity, given your hours may be falling.
• Whether you have taken unpaid leave or moved to part-time work in a way that affects your insurable income.
• Whether a parent’s policy has lapsed for non-payment without anyone noticing.
• Whether an EPOA is in place and whether it has been activated properly — this becomes urgent quickly.
• Whether you are personally paying costs that would fall on the estate, and whether that is being recorded.
• Whether a sibling arrangement about care and money is documented, since these are a common source of estate disputes.

Every New Zealand insurer writes cover for a carer’s household to its own wording, and the words are where the money is. Two policies that look identical on price can pay very differently when it matters. Closing that gap is the entire job of an adviser.

• Reviewing the carer’s own cover, which is the part nobody thinks to ask about.
• Working out whether a parent’s existing policies should be kept, reduced or released.
• Identifying what insurance can and cannot do about care costs, and referring the rest to a lawyer.
• Sizing life cover where an adult child is financially supporting a parent who would lose that support.

There are three ways to buy life cover in New Zealand, and they are not equivalent. You can buy direct from one insurer, which means you see one product range and one underwriting appetite. You can buy through your bank, which usually means a single insurer’s product sold under the bank’s brand, often with narrower definitions. Or you can go through an adviser, who quotes several insurers at once and is required to put your interests first.

The premium you pay is the same either way. Insurers build adviser commission into their pricing whether or not an adviser is involved, so going direct does not get you a discount — it just removes the person whose job is to argue your corner at application and at claim time.

• An adviser can see which insurer is currently taking your health history on standard terms, and which one will load or exclude it.
• An adviser can structure cover across two insurers if that produces a better outcome than putting everything with one.
• An adviser handles the underwriting back-and-forth, and is the person who chases the claim when a family is least able to.
• An adviser has to document why the recommendation suits you, which is a written record you can hold them to.

We are a referral service, not an insurer. We do not quote premiums and we do not sell policies. What we do is put you in front of one licensed New Zealand adviser who can compare the market properly.

1. 1

   You tell us what you are looking at

   The form takes about a minute. Nobody asks for your medical history on a web form — that conversation happens with the adviser, properly, and only once you have decided to proceed.

2. 2

   An adviser calls you

   A licensed New Zealand adviser talks through your situation: who depends on you, what you owe, what you already have in place, and what you are actually worried about.

3. 3

   They compare the market

   The adviser quotes across the major insurers, checks which of them will take your health history on the best terms, and puts the options side by side in writing.

4. 4

   You decide, in your own time

   There is no obligation and no cost to you. If the answer is that you already have enough cover, a good adviser will tell you that.