When it comes to your parents, it’s only natural to want to protect them. They raised you and have been there for you to help you through your life.
Life insurance can help provide financial security if one of them passes away to help pay for final expenses and with other expenses for your surviving parent.
Buying life insurance can be really expensive, too though. In some situations, there are also age limits on who can buy life insurance and when.
Do They Need the Coverage?
Before you make the decision to make the big purchase of life insurance on your parents, it’s important to determine if they really need life insurance or if they are going to be fine without it.
If someone in their family or close circle would seriously suffer financially if they were to pass away it’s worth taking a look to see if they would qualify for it and how much they would qualify for. Here are a few more reasons you may want to look into life insurance for your parents.
Leaving a Legacy
A life insurance payout can provide an opportunity for your parents to make a major donation to a charity or cause that they have always wanted to support. They could also put some of the money towards putting their grandchildren through post-secondary education.
A life insurance payout can be used for a good cause.
Read More: Nutritionist Covered By Insurance
Many people think that funds for final expenses means solely to pay for the funeral and burial of someone, but there is more to final expenses than just that. Many people will have medical bills or debt they need to pay off.
A life insurance payment can give someone’s family the ability to pay off these bills so that they are not responsible for taking care of them when they have passed away.
Increasing Retirement Income
If one of your parent passes away before the other, the surviving parent may have less income without the pension or income from the other parent.
Having a life insurance policy can help to replace a lot of the income lost when one of your parents has passed away.
Read More: Guide to Long Term Care Insurance
Give Them Some Early Income
Some insurance policies have a payout amount for the insured person while they are still alive. This is called an early death benefit, and it can help to pay for medical bills or debt while the insured person is still alive and not leave their loved ones with a burden to pay these bills.
Typically this benefit is only available when the insured is terminally ill and needs the monetary payout, but each policy will have its own rules.
Choices for Life Insurance
The type of life insurance purchased will depend on your parents’ age and health, as many policies will have limits to their benefits depending on the age of the insured.
Term Life Insurance
This is usually the most budget friendly option when it comes to purchasing insurance, but that also means it has the fewest options.
The policy will provide coverage over a certain amount of time – usually anywhere from five to twenty years. The coverage for this type of insurance will end when the time runs out on the plan.
It’s usually purchased when people have mortgage and debts to worry about, and to make sure they can replace some income for their young children if they need it. Term life insurance typically is not purchased by those who are retired or close to retiring, and is rarely used for estate planning.
Whole Life Insurance
As the name implies, this type of life insurance is one that will carry the insured throughout their whole life and will still be in place when they pass away as long as they have paid their premiums.
As a bonus, these policies can build up cash value that the insured can withdraw from whenever they need to. The downside is that it can take many years to build up enough cash value to make it worthwhile to withdraw from, so if the policy wasn’t purchased when your parents were younger they may not be able to enjoy the cash portion of it.
The big value from this is that it doesn’t expire like term life insurance does. So no matter when a parent passes away, the death benefit payout is guaranteed. This means there will always be enough for their final expenses and they may even be able to make a large charitable donation to a cause they support.
Guaranteed Issue Life Insurance
What’s really great about this insurance is that everyone can get it, and no one will be turned down because of a pre-existing medical condition or their age.
Now the downside to this kind of insurance is that it’s the most expensive kind of insurance and the payout amounts are relatively small when compared to the other types of life insurance out there.
Further, there is usually a clause in the agreement that states if the insured person’s cause of death is anything other than an accident there is a waiting period for the money to be paid out.
Read More: Assisted Living Insurance Costs
Final Expense Insurance
There are some policies that can be purchases which only cover final expenses, including medical bills of an insured person. This means that the payout amount is going to be smaller than many other life insurance policies because it’s only meant to pay out someone’s final expenses.
It is a type of whole life insurance, but you won’t have the same qualifications needed in order to get the policy because it’s really only covering someone’s final expenses and the payout is smaller.
How Do You Get Life Insurance for Your Parents?
So after all that information, you’ve decided that your parents need life insurance and you want to go ahead with getting it for them. How do you do that?
Well, the first (and most important) part is that you need to get their permission to take out an insurance policy on them. They will also need to sign the application for life insurance themselves.
Further, your parent(s) needs to be willing to go through the process of applying for life insurance. For example, some types of life insurance will require a medical or physical examination to determine if your parents are in good enough health to be insured.
So you parent must be willing to go through the medical and physical exams on their own to qualify for insurance.
When someone takes out a life insurance policy on another person (IE not themselves) they must be able to prove they have what’s known as insurable interest.
This means that the person taking out the policy would financially suffer if the insured person were to pass away. In most cases, children have a valid case for proving insurable interest on their parents as parents will have helped their children for most of their life and helped provide for them.
Always Compare Quotes
If you are going to get life insurance for your parents, you should always compare quotes from different companies before choosing one.
The benefits offered by one, or the requirements to qualify for life insurance may be different from company to company. You will always want to look for things like how quick the benefit is paid out when someone passes away.
For some insurance companies, they will pay the benefit within a day or two. Others will have a waiting period to make sure the benefit should be paid out, and there’s no reason to void the policy.
You may get a quote from one company that seems like a much lower premium, but they may not have the same policy amount to pay out or they may not have a cash value to take out (if that is important to you).
Either way, it’s important that you compare quotes from different insurance companies to make sure you are getting exactly what you want and your parents will have the coverage needed and what they are looking for.
What if You Are Not the Beneficiary on the Insurance Policy?
There is a chance that your parents may choose multiple people to be the beneficiary on their insurance policy. You are paying the premiums, but does that mean you will be the sole beneficiary?
This depends on the type of insurance policy they have on them. You may feel as though you should be the only one to get the payout, but you may have siblings that your parents want to help out as well and they may get a portion of the payout.
Either way, you will need to talk to you parents about who they have designated as their beneficiary so you know what to expect when the time comes that they pass away.
You may wish to ask them that you be the sole beneficiary since you are the one paying their premiums, but this will be a discussion to have with them and may depend on the insurance policy they have.