What if grandparents were not there?
Grandparents are becoming one of the most important parts of the modern family, accordingly to recent research.One of the UK’s leading insurance companies recently calculated that grandparents are providing £33 billion worth of free childcare each year.  The research suggests that about half of all grandparents look after grandchildren and help around the home, while parents are out at work – 99.5% without pay.

Helping the family economy
This allows parents to be economically active – which is valuable to many families, and also allows grandparents and grandchildren to benefit from greater interaction, especially as many older people have more time to spend with the young. But with 32% of grandparents saying that they feel guilty if they say “no” to providing childcare and 30% having to cancel plans to do so, there is little doubt that the older generation is under pressure.

Risking loss of support
The fact is that older people, while they may enjoy having greater contact with grandchildren, are not always going to be there, especially if they wear themselves out acting as cooks, cleaners,gardeners and chauffeurs.
This raises an important issue about childcare in the absence of free family support.  The fact is that those with young children can find it very difficult to manage without help.  Childcare is expensive and can make it unviable for a second parent to work, if the costs exceed a reasonable proportion of take-home pay.  But if one parent stops working, income obviously drops.

Should one parent die or become ill, the position is even more difficult to cope with.

Family protection insurance
Fortunately, it is possible to arrange family income insurance that provides a regular income, should either parent die, at relatively modest cost (depending on age and state of health).  This can be used to pay for the cost of childcare.Health insurance can provide an income to cover essential expenses, including childcare, in the event of long-term illness.  Most plans only cut in after four weeks of incapacity (longer if you want to keep premium costs down) and carry on until the individual gets better, or reaches an agreed age (or dies).

This so-called “permanent health insurance” can replace up to 75% of income, but might be expensive in some cases.  Gearing it to the cost of childcare may be an option, although you should discuss with your independent financial adviser what level of cover is most appropriate in your circumstances.

Premiums are related to occupation and age but from 21st December 2012 gender will no longer be a rating factor.  Currently, cover is more expensive for women than men, due to statistical differences in the likelihood of becoming ill!   Since premiums are fixed at the outset of the policy, starting sooner, rather than later, may be a good idea.