Should I Buy Life Insurance for my Parents?
You can purchase life insurance for a parent as long as you have an insurable interest and the insured's consent. An insurance company will only accept an application if both of these criteria are met. A small, permanent life insurance policy is often a good choice for a parent.
Consider other options, such as a savings account or pre-need insurance, before purchasing life insurance to cover end-of-life expenses. If your parents are capable, another option is for them to purchase a policy and name you as a beneficiary.
Can you buy life insurance for a parent?
An insurer will let you buy life insurance on your parents if two conditions are met: you, the policy owner, must have consent and an insurable interest in your parent.
You'll need to understand a few key life insurance terms. If you would suffer financially if your parents died, you have an insurable interest in their life. Children frequently have an insurable interest in their parents; however, depending on the size of the life insurance policy you wish to purchase, you may be required to demonstrate your insurable interest.
The named insured is the individual who will be covered by the life insurance policy — in this case, your parents. The person who will pay for and own the policy is known as the policy owner.
Why would I buy life insurance for a parent?
Purchasing life insurance for a parent can provide financial security in the event of unpaid expenses after the parent's death. Final expenses may include:
- Funeral costs: Typical funeral costs range between $6,000 and $12,000. If the parent's family must pay for the funeral out of pocket, this can be a significant financial burden.
- Financial debts: After the death of a parent, credit card debt or outstanding loans may need to be paid. These unexpected bills may fall on family members.
- Medical bills: For people who die while undergoing treatment, doctor and hospital bills can be extremely high.
- Moving a surviving parent: When one parent dies, the adult children must frequently relocate the other parent to care for him or her. Long-distance moving costs can be prohibitively expensive.
How to buy life insurance on a parent
Begin by having a conversation with your parents if you are considering purchasing life insurance for them. Share your financial reasoning and obtain permission to be the owner of a life insurance policy. Understanding their needs and what they already have covered will help you decide whether or not to purchase life insurance for your parents.
You can start getting quotes once you have your parent's permission to buy life insurance. The type of policy you purchase will be determined by how much coverage you require, the reason for the financial obligation, and the age of your parents.
Final expenses insurance is frequently the best option for older individuals and elderly parents with minor financial needs. These guaranteed whole life plans typically have death benefits of less than $50,000 and last for the duration of the parent's life. They do not necessitate a medical examination.
A robust term life insurance policy would make more sense for greater coverage, such as life insurance protection for a mortgage.
After selecting a life insurance policy, you must select a beneficiary and demonstrate insurable interest by demonstrating that you would suffer financial hardship as a result of the death of a parent. If you are approved, you will begin paying life insurance premiums.
Best life insurance for a parent
The best life insurance policy to purchase for your parents is determined by their health, age, and your financial situation. A guaranteed universal life insurance policy is a great policy for many people, particularly parents who need lifelong coverage or are unsure whether they want term or permanent life insurance.
This type of permanent life insurance has a cash value account that cannot fall below zero. This feature prevents the cash value account from becoming negative, which could result in the cancellation or revocation of a permanent life insurance policy.
Term life insurance is another good option that may save you money if your parents are still young. Term policies are less expensive than permanent policies such as guaranteed universal.
Other options besides life insurance
Aside from life insurance, another strategy is to open a savings account for your parents. You could start saving money for end-of-life expenses, which you and their dependents could use after they die.
Finally, if you're only concerned about funeral expenses, you could get a pre-need insurance policy. This type of plan allows you to prepay for a funeral through the funeral home, which simplifies payments. However, we do not recommend these policies in general. They offer no flexibility because the entire death benefit only covers funeral expenses.