Find Cheap Life Insurance Quotes in Your Area
Buying life insurance for a parent is possible if you have an insurable interest and consent from the insured. If either of these criteria are not met then an insurance company will deny the combined application. Typically, a good life insurance option for a parent is a small, permanent life insurance plan that will last your parent’s entire life. Before choosing life insurance to provide for after-life expenses, you may want to consider other options like a savings account or pre-need insurance which are easier to purchase. Additionally, a parent can always buy a policy and name you as a beneficiary if they are capable.
Can you buy life insurance for a parent?
Simply put, you can purchase life insurance on your parent. However, there are two criteria that must be met before an insurer will allow you to purchase this type of policy. Additionally, you should be aware of several life insurance terms. The first is identifying the named insured. This is the person that will be insured under the life insurance policy — your parent. The policy owner is the person who will own, pay and make changes if necessary to the policy.
In order to purchase life insurance for your parent you, the policy owner, must have consent and insurable interest in your parent, the named insured. You're considered to have an insurable interest in your parent's life if you would suffer financially by their death. In most situations, children will have an insurable interest in their adult parents. However, you may still need to prove an insurable interest depending on the size of the life insurance policy you are trying to purchase for your parent.
Why would I buy life insurance for a parent?
Buying life insurance for a parent can provide financial protection in the event that the parent dies and has outstanding expenses. People often find that a parent who passed away has left unpaid expenses. This can include after-life expenses like:
- Funeral expenses - After a parent has passed, funeral arrangements may not have been planned. Typical funeral costs can range from $6,000 to $12,000. This can be a large financial burden on the family of the parent if they need to pay for the funeral out-of-pocket.
- Financial debts - Credit card debt or outstanding loans may still need to be paid for once a parent has passed away. These expenses are often passed down to other family members, leaving them with unexpected bills.
- Medical bills - In some cases, the parent may have passed away in a hospital due to health complications. Medical bills can carry an extremely high cost for people who pass away while under treatment in a hospital.
- Moving a surviving parent - Often when one parent passes and another is still alive, the adult children will move that parent closer to home to care for him or her. Moving expenses, if it is a long-distance move, can be very costly.
Before considering life insurance for a parent, we would recommend chatting with your parent to understand their financial situation. By understanding their excess needs and what they already have covered, you will be able to decide if life insurance is the right tool.
For example, your parent may own a house which they intend on leaving with you once they pass. The house may still have a mortgage outstanding and thus when they die the mortgage would get passed down to you. In this case, you may not have the extra money to take on a mortgage and life insurance could be a viable option to support this extra financial liability.
How to buy life insurance on a parent
If you are thinking about buying life insurance for your parents, you should begin by having a conversation with them. During this conversation you should share your financial reasoning for doing so and get their consent regarding you being the policy owner of their life insurance.
Once you have received consent from your parent to purchase the policy with them as the insured party, you can begin getting quotes. The policy that you buy will depend on how much money you need coverage for, the reason for the financial obligation and the age of your parent since this will impact the type of life insurance available.
In most situations, for smaller financial needs, final expenses insurance will be the best life insurance option for older individuals and elderly parents. These are guaranteed whole life plans with smaller death benefits — usually less than $50,000 — that will last for the entirety of the parent's life and are issued without needing a medical exam. For larger financial coverage, such as life insurance protection for a mortgage, a more robust policy such as term life insurance would make more sense.
After you have selected a life insurance policy you would then need to choose a beneficiary and prove insurable interest. As stated before, this would involve showing that you would experience financial hardship due to the passing of a parent. If approved, you would then begin to pay premiums on the life insurance.
Best life insurance for a parent
The best life insurance for a parent will depend on their health, age and your financial situation. For some individuals setting up a savings account or an emergency fund may be the best option instead of paying for life insurance. However, a great overall policy will be a guaranteed universal life insurance policy. The plan is a form of permanent life insurance that has a cash value account that is guaranteed to not go below zero. Typically, if a cash value account in a permanent life insurance policy goes negative, the life insurance could be voided or cancelled. The guaranteed universal plan is a good option if your parent needs lifelong coverage or is uncertain about whether they want term or permanent life insurance.
Another good option if the parent is younger may be term life insurance. Since a term policy is cheap, you may be able to save money by choosing this type of life insurance instead of permanent policy like guaranteed universal.
Other options besides life insurance
One option besides life insurance is to open a savings account for your parent. In this account, you could begin to put money aside for end-of-life expenses, which then could be used by you and their dependents once they have passed.
Finally, if you are only worried about funeral costs, you could decide to purchase a pre-need insurance policy. This is a plan which allows you to prepay for a funeral through the funeral home. Although this plan makes payments easy, we would not recommend them as they provide no flexibility since the entire death benefit would only cover funeral costs.