The caregiving protection paradox: When supporting family means sacrificing protection

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The caregiving protection paradox: When supporting family means sacrificing protection

The sandwich generation—middle-aged adults simultaneously supporting children and aging parents—may be America’s new financial backbone. 

Today, 29% of caregivers are part of the sandwich generation. Among caregivers under age 50, AARP survey data shows that number rises to 47%. These caregivers are often their family’s financial safety net, bridging the gap for multiple generations. And with longer life expectancies, rising eldercare costs, and delayed financial independence for younger generations, this generation is increasingly taking on greater financial responsibility over a longer period of time. 

Amidst the pressures of being financial anchors for their families, caregivers often sacrifice their own financial health. According to U.S. News, the average caregiver spends 10%-25% of their yearly income on caregiving-related expenses. And when it’s time for budget cuts, life insurance is often one of the first items on the chopping block. For those without coverage, inflated caregiving costs may prevent them from purchasing a policy altogether. In fact, LIMRA research shows that 36% of consumers haven’t purchased life insurance because of competing financial priorities. 

The result is what is called the caregiving protection paradox. Caregivers can easily become consumed by their responsibilities, causing them to neglect their own care and become exposed to financial vulnerability. As Everly Life explores in this article, this financial strain may be widening the gap between caregivers and having adequate life insurance coverage.

Why Caregivers Dismiss Having Enough Life Insurance Coverage

Caregiving reshapes household budgeting. 

Caregiving costs can largely dictate the household budget. For example, monthly medical supplies average between $200-$400 per month, and specialized transport services can cost as much as $100 per ride. These expenses can override funds that might otherwise be allotted to life insurance coverage. 

Present caregiving demands are the focus, not future risks. 

Caregivers may solely focus on their role as providers and neglect that they need protection, too. They can become so overwhelmed by their daily responsibilities that they don’t have the mental capacity or time to worry about getting life insurance coverage. 

Life insurance coverage doesn’t feel urgent. 

Caregivers are constantly managing short-term and urgent demands. With these daily demands, life insurance coverage can seem less important than other items on the to-do list.

What Happens When the Caregiver Isn't Protected

For the sandwich generation, reducing financial burden often means putting their long-term financial wellness, including life insurance coverage, on the backburner. But when a caregiver deprioritizes life insurance coverage, this decision can have long-term effects on them and their family members.

The potential for financial instability increases.

Caregivers are often the primary earners and financial decision-makers for their families—so their income is critical for maintaining a normal standard of living. Without adequate life insurance coverage, the loss of that income can leave surviving family members left to cover everyday expenses, like childcare, healthcare, or eldercare costs. A 2022 LIMRA survey found 4 in 10 families would face financial hardship within six months if the primary earner passed away; 1 in 5 families say that it would occur within just one month.

That indicates that the likelihood of family members being able to sustain in the caregiver’s absence is relatively low.

The financial burden becomes heavier for the next caregiver.

Caregiving needs won’t disappear because the caregiver passes away. More than likely, the financial and logistical responsibilities are given to other family members. When an uninsured or underinsured caregiver passes away, they can leave a heavy financial burden for their successor. Adult children, spouses, or siblings may need to reduce work hours, acquire debt, or use retirement savings to fill the gap.

Short-term savings can have long-term financial setbacks.

According to a 2021 AARP report, 1 in 3 caregivers reach into their personal savings to cover costs, so it’s understandable that strict budgeting might be a priority. While the decision to delay or forgo life insurance coverage may provide temporary financial relief, it could be a costly choice down the road. Life insurance premiums are usually lower when purchased at a younger age since most people are healthier in their youth. When you ignore getting the right coverage now, securing affordable coverage may become more difficult later.

A Shift in the Protection Conversation for Caregivers

Research shows that 42% of U.S. adults lack sufficient life insurance. For caregivers, the barrier to coverage is often lower disposable income and competing financial priorities. And while the sandwich generation’s circumstances might not change tomorrow, insurers and financial advisors can help close the caregiving-related protection gaps today through: 

• Employer-sponsored benefits tailored to caregivers. 
• Simplified or more affordable coverage options. 
• Financial planning that integrates eldercare realities. 

Caregivers are responsible for holding multiple generations together financially while often being amongst the least financially protected themselves. A new conversation around life insurance coverage might just be the next step towards ensuring the sandwich generation has enough coverage.

This story was produced by Everly Life and reviewed and distributed by Stacker.