Providing life insurance to your parents may be something worth considering; but first you will need to demonstrate insurable interest and gain their consent before taking this step.
Choose to name minor children as beneficiaries or create a trust with multiple individuals and institutions as beneficiaries. Furthermore, riders allow for faster death benefits.
An unexpected parent death can be emotionally and financially devastating. Therefore, adult children often turn to life insurance policies to cover funeral costs, debts, final costs and ongoing needs like nursing home care. A life policy also provides an avenue for leaving behind a legacy of cash or property to family members in their wake.
For life insurance policies on someone else, to qualify as their beneficiary and owner you must establish an “insurable interest.” As their child you automatically meet this criterion.
While you cannot take out life insurance policies without their permission, they may allow you to be the beneficiary. They must first undergo the standard life insurance process which includes medical exams and legal competency to sign their own application form for coverage. There are various policies available and choosing one will depend on both you and your parents’ situation.
Types of Life Insurance Policies for Parents
Your ability to purchase an insurance policy on your parent is contingent upon satisfying two key criteria: consent and insurable interest. This requires showing how their death would have an economic implication for you – this should be simple for children with an insurable stake in their parents.
Your next step should be selecting an insurance policy type: term life or whole life policies are two options that provide temporary or lifetime protection that builds cash value over time. Finding one that meets both their needs and budget should be your top priority.
Burial or final expense insurance is a type of whole life policy designed specifically to cover end-of-life costs and debts such as medical bills and credit card balances. You can purchase it as either an add-on to other types of life insurance plans, or buy it separately as a standalone product. When opting for plans requiring medical exams, make sure your parent feels at ease by offering them enough preparation time so they are comfortable during this process.
Assessing the Need for Life Insurance on a Parent
Bereavement can be financially devastating for families left behind. While adult children may be tempted to purchase life insurance policies on their parents, there are several important things they must keep in mind before doing so.
Step one of determining your insurance needs is estimating funeral and other expenses such as unpaid debt and medical bills, using an online tool for estimation purposes.
If your parents only require limited coverage, funeral or final expense insurance may be an ideal solution. This type of whole life policy specifically designed to pay for end-of-life expenses often does not require medical examination.
Importantly, your parent must give their consent and be legally competent before signing an application for life insurance on them. Also required is proof of insurable interest which means you must demonstrate their death would place a financial strain on you – failing this test could subject the policy holder to gift taxes; for this reason it’s wise to seek advice from financial or tax professionals before applying for life insurance on them.
Researching and Comparing Insurance Providers
Before making a definitive decision on an insurance policy for your parents, it’s essential that you thoroughly research each option available and determine the one that meets their individual needs and budget best. In addition, compare life insurance companies in order to find one with competitive rates.
Dependent upon your needs, you could opt for purchasing a term policy, which only offers coverage for a certain time frame. However, this option could prove expensive; alternatively you might consider whole life or universal life policies instead.
Life insurance policies on parents are usually purchased to cover funeral and end-of-life costs as well as any potential debt your parents might leave behind.
In order to purchase life insurance on someone else, you’ll first need to prove that you have an insurable interest in them – typically by showing that their death would cause financial losses for yourself and/or others. Children typically fulfill this criteria automatically.
Collecting Necessary Documentation
When purchasing life insurance on another person (for instance a parent), typically you must show evidence of having what’s known as an “insurable interest.” This means you would experience financial loss or hardship without their death – this usually applies automatically with family members but for other beneficiaries it may require more proof.
Before shopping for insurance policies for your parents, first ascertain their needs by reviewing debts, funeral costs and any final expenses they might have incurred. A helpful online tool can assist in this calculation process.
Finding out whether your loved one already has life insurance is also wise. Use free services like the National Association of Insurance Commissioners’ Life Insurance Policy Locator to search for existing policies; check with their employer to see if they offer group life coverage; this way you may become their owner/insured of said policy without needing a medical exam.
Applying for Life Insurance Coverage
Engaging your parents about life insurance should be a top priority. While the conversation may be delicate, there are resources that can help facilitate it – including tips and tools that ensure they choose an acceptable policy.
Step two is to select an insurance plan and amount that makes sense for your parent’s situation. Also consider any debts or final expenses which will need to be addressed and an online life insurance calculator may help in calculating how much coverage will be necessary.
Your next step should be identifying who will own and insure the policy, in most cases the same individual may serve both roles; beneficiaries are sometimes selected based on who owns/insures it as well. Depending on the type of policy being purchased, an examination may also be necessary – in such an instance you must schedule an appointment and bring along both parents to ensure an efficient experience.
Undergoing Medical Examination If Required
To be considered valid, an insurance policy’s owner and beneficiary must agree on an amount to insure, as well as have insurable interest – which means their finances would be affected by a loved one’s passing if that person were to die. Family members often have automatic insurable interest.
A death benefit can help cover funeral costs, outstanding financial debts such as credit card bills or loan balances, as well as medical expenses such as prescriptions or hospital visits. Some policies even offer living benefits that can help cover care in assisted living facilities or long-term care arrangements.
Your parents may require a medical examination in order to be eligible for life insurance policies, though this usually entails answering some health-related questions and answering some simple tests. Most final expense and whole life policies don’t need medical exams and can be issued based on answers given during an application process; at which time they must give consent by signing their name on an insurance form.
Reviewing and Finalizing the Policy
Talking openly and frankly about end-of-life wishes and finances can be challenging for many people, yet having an honest discussion about life insurance may bring comfort and peace of mind.
To buy life insurance on a parent, it must first be established that there is insurable interest – which means proving any financial losses due to his/her death such as funeral costs, final medical bills or unpaid debts that would arise upon death. Examples could include funeral costs, final medical bills and outstanding credit card balances among many others.
Your best option when selecting the amount of coverage needed is speaking with a financial professional and discussing their assets, debts and savings with them.
Once you and your parents have selected a type of policy, term length, coverage amount and other options, it’s time to apply. Your insurer will typically send in a medical professional for an exam and collect urine and blood samples prior to approval of the policy application naming you as both owner and beneficiary.