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Baby boomers: Insurance challenges of the 'sandwich generation'

Purchasing the right insurance protects your family from financial disaster. But the challenge can be daunting, particularly if you're a baby boomer in the so-called "sandwich generation."

These boomers are sandwiched between caring for both children and elderly parents, while also trying to secure their own financial futures.

That means they have a plateful of issues, says Wendy Boglioli, national spokeswoman for Genworth Financial. "They kinda are more than a 'sandwich generation' – it's a whole club sandwich," she says.

Here are some tips for making sure every generation of your family is properly insured.

Caring for children

Your own policies cover your child's earliest insurance needs. But you can get a head start on your child's adult coverage by buying a small whole life insurance policy for him or her. This type of insurance can provide coverage over the child's entire lifetime at a fixed premium, and there's a cash value component that the child can borrow against later in life.

insurance-baby-boomersTurn the policy over to the child later in life or pay it off in a shorter time, says Tara Reynolds, corporate vice president at MassMutual. Buying a policy also helps "instill the importance ofinsurance coverage in their children early in life," she says.

Once the child leaves the nest, insurance needs to evolve. Many adult children get health insurance through their first full-time employer, but others are not so lucky. Federal health care reform gives uninsured adult children a new option, says Chekesha Kidd, president ofAetnaStudent Health.

"Health plans that offer coverage to children on their parents' plan are now required to make coverage available until the adult child reaches the age of 26," she says.

As time rolls on, keep discussing insurance with your adult children, Boglioli says. Young, healthy people may be tempted to skip things like health insurance, life insurance or disability insurance, she says.

Boglioli suggests asking an adult child to think about the financial consequences of an accident, illness or other health catastrophe.

"Insurance is a great way for someone else to take the burden off us," Boglioli says. "Would you rather use your money or someone else's?"

Caring for parents

Marcus Henderson, president and CEO of Henderson Financial Group in Tennessee, urges boomers to talk with their parents about insurance and general finances. Parents who don't plan for health insurance expenses and long-term care can trigger a chain of financial destruction. "A miscue in this area has a domino effect," he says.

For example, parents with inadequate insurance may be forced to spend all their retirement income if a serious health issue arises. When that money is gone, they may deplete their home equity (the current market value of your home minus the outstanding mortgage balance). Finally, they may need to get monthly income from you.

"The parents' financial stability not only affects (themselves), but the family unit as a whole," Henderson says.

The National Association of Insurance Commissioners recommends making sure your parents sign up for Medicare before they turn 65. Fill any gaps in their coverage with Medicare Supplement Insurance, often known as a Medigap plan. These plans offer additional coverage.

Also, look into long-term care insurance for your parents, Boglioli says.

"There is a period for almost everyone today when they'll need some kind of long-term care," she says.

Finally, look at your parents' life insurance coverage. Parents without life insurance should consider buying a guaranteed-issue whole life insurance policy that can be used to cover end-of-life expenses (such as funeral costs), according to the National Association of Insurance Commissioners. Guaranteed-issue policies are available to everyone, regardless of health conditions.

As with your children, it's important to keep an ongoing dialogue with your parents. Otherwise, you may be in for a surprise.

"Life insurance, home insurance – many older people will drop those," Boglioli says.

Caring for yourself

Too often, boomers overlook taking care of No. 1.

"Boomers put themselves last on many of these things, because we think we can do it all," Boglioli says.

That's a mistake, she says. She suggests tapping a financial adviser who has teamed up with other experts, such as accountants and elder care experts, to deliver a comprehensive approach to your finances.

Before you retire, you should find out whether you can remain on a workplace health insurance plan in retirement and at what price, Henderson says. If the insurance is less than comprehensive, adjust the coverage.

"Boomers also should pay careful attention to the health concerns of their parents," Henderson says. "Chances are, their ailments will become the boomer's ailments."

If your spouse is going to continue to work, see whether you can be listed under his or her health insurance policy.

If those options fail, pair a high-deductible, lower-premium individual health insurance plan with a health savings account. This allows you to sock away money on a pre-tax basis that can be withdrawn tax-free to pay for qualified medical expenses.

Don't forget to make sure you have proper life insurance and long-term care insurance. If you find it difficult to afford both options, there are alternatives. For example, Reynolds says, some whole life policies have an option to purchase a long-term care insurance rider. This rider allows you to tap into your life insurance to pay for nursing home care or home health care expenses. The money spent on such care is then deducted from the death benefit paid out to your beneficiary.

In some cases, you may find policies that plug several holes in your coverage, Reynolds says. "Some (whole life) policies even offer a rider to accelerate the life insurance benefit to pay for long-term care services," she says.

All of this legwork will pay off by securing your finances for the long haul, Boglioli says.

"The chance of us living a long life is huge," she says. "You just don't want to run out of money before (you run out of) breath."

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