When my granddaughter was born six and a half years ago my wife and I took out a life insurance policy on my daughter. Morbid thought? I would put it more in the cautious reality category.
To me there had just opened an 18-20 year window in which my wife and I could possibly be promoted from grandparents to parents (again) if something unforeseen happened. Even though my daughter was a smoker, a $250,000, 20 year term policy was cheap peace of mind. We had seen and heard of plenty of grandparents whose retirement goals were derailed by the financial burden of money once again going into child rearing rather than retirement accounts.
In our case there is no backup. The dad is a deadbeat that would never take responsibility and we love our granddaughter far too much to ever consider allowing her to be adopted. If something happened to our daughter we, and she, wouldn’t want it any other way.
This doesn’t have to be about single moms or single dads. Grandparents understand far better than young parents the devastation that can occur to a child’s life if someone doesn’t carry life insurance on the parent of their grandchild. I’ll stop short of saying it is your responsibility as a grandparent to carry life insurance on your child, but consider the reasons it’s a good idea.
The possibility that you may be thrust back into parenthood is obvious. It is simply not cheap to raise a child or fair that your retirement should be knocked off the tracks. There is also the scenario where your child is married and neither of them are mature enough yet to understand that premature death is a problem. Carrying life insurance on your child can ensure that even though there is another parent that will carry on, your grandchild’s education and future will be taken care of. Making yourself the beneficiary (rather than your child’s spouse) will make sure that lump sum of money is used properly. If they weren’t mature enough to take out the life insurance, managing, say, $250,000 is probably a bit far fetched.
Bottom line. If your child is mature enough to take care of all of this on their own, buying life insurance and making a plan, setting up a trust and so on, then you should stand back and just be proud. If that’s not the case, the small premium for a term insurance policy is a small price for huge peace of mind. It’s far better that you do than no one does it.