Buying Life Insurance On A Parent

We are often approached by grown children who are considering the possibility of buying life insurance on a parent. These potential clients have many different questions about what is available, and what paperwork must be completed if you are taking out life insurance on a parent.

People are usually very surprised with how simple it really can be when applying for life insurance on your parents, but it is important to understand what to expect. As someone who owns a life insurance policy on a parent, I can give you some first hand knowledge on why I did it, and the process which occurred.

Many different reasons exist why someone would consider taking out life insurance on a parent. Every situation is different from inheritance, estate planning, or final expense. When an insurance company looks at reasons for insurability you just move prove you would be impacted financially upon the passing of your parent. This is a very easy process, but it does keep people from taking out massive policies without proving they actually need this much life insurance coverage.

Reasons For Taking Out Life Insurance On A Parent

We are approached daily from someone is planning on taking out life insurance on a parent. Some different reasons exist, but three overwhelming reasons include

• Legacy Creation
• Estate Planning
• Final Expenses

Legacy Creation

The first reason many financially savvy people decide upon life insurance for an aging parent is to maximize inheritance and create a legacy. Since generally, life insurance proceeds are received tax free then it may be a smart move to position some of your assets you plan on passing to the next generation into a life insurance policy. This is also a great way to make sure future generations receive the proceeds as laid out in the beneficiary agreement. It is much easier than sibling fighting over who gets what.

Estate Planning

Another reason which ties right into this is estate planning. Whenever someone passes away the last thing they want to do is leave money around for Uncle Sam. However, the government does have a way to make sure they receive plenty of taxation on the passing of an inheritance. A great way to leverage your money and make sure you can pay a sizable tax bill is through the use of taking out life insurance on a parent.

Final Expenses

The last reason we will discuss is probably the most common we encounter and it’s to cover final expenses. Final expenses is something nobody can really escape, and most often the cost falls upon the children of the parent who has passed. Most people do not have $10,000 earmarked to pay for their parents funeral arrangements and medical bills. By taking out life insurance on a parent you can pay a small monthly bill to ensure the proceeds will be there at that time.

Long Term Care

Another common use of life insurance for aging parents is for the reimbursement of long term care expenses. In many situations, grown children will be left to pay for the long term care needs of their aging parents. This can cost much more per year than the above figures I have shown for a funeral. I have seen family finances devastated because of a long term care situation. Most cases, someone does not have long term care insurance and the children are left to pay out pocket. A child can put a life insurance policy on a healthy aging parent if they foresee a need for long term care and would like a financial reimbursement for the huge expenditure.

Other Types Of Life Insurance For Aging Parents

One of the most common reasons people do not apply for life insurance for aging parents is because they feel their parents are too old in order to even get life insurance. In many cases, we can still find affordable life insurance options for aging parents. Some of the most common types of policies which would be available include:

• Term Life Insurance
• Guaranteed Universal Life Insurance
• Universal Life Insurance
• Whole Life Insurance
• Survivorship Life Insurance

All of these type of life insurance serve a particular purpose and fulfill a certain need. If you are looking for a long term solution, and policy which will cover someone until the end of their life, than term life insurance is not your best option. However, if you see a temporary need for coverage for something like a mortgage or other type of debt than term life insurance may be your most affordable option based upon the age of the applying individual.

If you have two parents and are looking for coverage which will not pay until the death of the second parent than survivorship life insurance may be a great option for you. This policy allows you to further leverage your premium for a death benefit, since it is on the life of two individuals. This type of policy is especially effective in legacy creation and estate conservation type situations.

If you are looking for life insurance for aging parents it is important to evaluate and understand your options before making a long term commitment. We have experienced independent life insurance agents who are happy to help you navigate the many options which exist, and help you choose a policy to create peace of mind for you and your family.

Insurable Interest

Regardless of your reasons for needing to buy life insurance for your parents, one thing most insurance companies will require before issuing a policy is called “insurable interest.” In the most basic sense, insurable interest is proof, should your parents die, you would suffer some kind of financial loss. This requirement protects insurance companies from issuing policies which are taken out by children who simply think their parents may not have long to live and create a fortune by purchasing big life insurance on them.

An example of insurable interest would be if your parent’s have debts which would pass to you in the event of their death, such as a mortgage or co-signed loans. The most obvious instance of insurable interest existing would be if you would be responsible for burial expenses upon the passing of a parent and the needs are not already met.

How To Get Started

When it comes to taking out a life insurance on parent we have made the process as painless as possible. Once you know how much coverage you are looking for, please head over to our online life insurance quoting tool. You can see quotes from over 50 life insurance carriers in just a matter of minutes. When you are ready to apply, you can contact us or even start the application online and we will follow-up to help you complete it.

If you have any additional questions or concerns please reach out to us to speak with a licensed and experienced life insurance agent.