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Parents often help their adult children pay rent and cell phone bills, but one way to help your adult children without hurting yourself is through insurance. 

There are a variety of ways to use insurance policies to help them achieve financial security.

1. Create a legacy through life insurance

Most people view life insurance as a way to pay for final expenses, but it’s much more than that. Life insurance is also a financial solution for those looking to leave a legacy. 

Life insurance benefits are tax-exempt, which makes this a good way to transfer wealth from one generation to another.

2. Use a life insurance policy’s cash value to provide funds

A typical permanent life insurance policy has a cash value account that grows over time. If you have such a policy, you can tap into its cash value.

“One of the benefits of life insurance is that the money doesn’t need to be used for a certain expense,” says Barbara Pietrangelo, chair of Life Happens. “Life insurance cash value can be used however the owner sees fit, whether that’s for income replacement, money for college, or a down payment on a house.”

According to the Pew Research Center, one in three adults between the ages of 18 and 34 live with their parents. Borrowing against your life insurance’s cash value is one way to help children pay off loans, buy a home or start a business. 

3. Buy life insurance for your child

The main reason to buy life insurance is to replace a wage earner’s income. Although it often is dismissed as unnecessary, buying a permanent life insurance policy for a young child can be beneficial. 

“Investing in a policy when a child is young allows for the lowest rates possible. If you purchase a permanent life policy, they will have guaranteed insurability for their lifetime, as long as the premium is paid,” says Pietrangelo.

For example, a $20,000 policy purchased at birth may accumulate as much as $4,000 in cash value by age 18. With annual premiums often less than $200, this can be a vehicle for helping a child get cash for college or other needs.

There’s a downside to borrowing against the cash value of such a policy. Not only can it reduce the amount of cash available in the future, but depending on the specific provisions of the plan, it also can reduce the death benefit.

If you’re planning the gift of a life insurance policy, consider life insurance companies that offer guaranteed coverage riders that allow your children to increase their coverage level in the future without having to go through the underwriting process. This means they’ll be able to buy more coverage in the future regardless of health conditions.

“It is never too late to get your child life insurance, so consider talking to an agent to learn what your options may be,” says Pietrangelo.



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4. Keep an adult child on your health insurance plan

Health insurance can be costly. The Affordable Care Act lets parents keep their children on a health plan until 26. Keeping your children on your employer-sponsored plan will save them money. 

The average annual premiums for an employer-sponsored single plan can cost well into the thousands. That doesn’t include the out-of-pocket costs, which have skyrocketed in recent years. Your child may pay even more for an individual health insurance plan. 

Your adult children could save that money by staying on your health plan. That could help them put that money toward saving for a home or future rent. 

5. Let your adult child stay on your auto insurance policy

Auto insurance is a major expense for young adults. As long as your child is still living at home, he or she probably can remain on your policy.

Insurance rates for young drivers normally are high because of their greater risk for having auto accidents. It’s usually cheaper to keep a teen on the family policy rather than putting him on his own policy.

Shop around to determine which alternative is less expensive.

6. Purchase long-term care insurance

Without LTC insurance, children may have to bear the burden of paying for your care themselves. They may have to select a less-than-appropriate level of care because they can’t afford anything more intensive.

“One of the greatest gifts you can give your children is to plan ahead for your future financial needs. When you get older and need consistent medical care, your children might not have the financial means to provide for you. Long term care insurance benefits you and your children equally,” says Pietrangelo.

Another benefit of LTC insurance is that it can shield your estate from costly medical expenses, leaving more for your children to inherit.

A parent wants to protect your children — no matter their age. However, make sure you don’t sacrifice your own finances doing so. Instead, look at these insurance options to help you children as they look at head out on their own. 

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