Just like shopping for coverage for yourself, buying life insurance for your parents can be easy if you follow these steps:
- Determine how much coverage you need. Consider your parents’ assets, debt, savings and other financial obligations, and try to take out a policy to match.
- Choose a policy type. There are two main categories: term life insurance lasts a set period of time, while permanent life insurance offers lifelong coverage and builds cash value over time. Term life insurance is sufficient for most people, but if your parents have a higher risk tolerance and want to treat their policy as more of an investment, permanent life insurance might be a better fit.
- Look at available riders. If add-ons like a waiver of premium or disability rider are important to your parents, go for an insurer that offers these riders.
- Compare quotes from a range of carriers. Premiums can vary wildly between insurers, especially for seniors who may have health conditions. Get a free quote now at www.cheapterminsurance.com
- Decide on the owner and beneficiary of the policy. If you’re taking out a policy on your parents, you may be both the owner and beneficiary. But ultimately, it’s your parents’ say.
- Apply for a policy. Once you’ve hammered out all the details and chosen a carrier, apply for a policy and submit any supporting documentation.
Can I still buy a policy for my parents if they’re in poor health?
Yes — your options just may be more limited. To begin, look at insurers with lenient underwriting guidelines, and carriers who specialize in high-risk applicants (like seniors).
If your parents have serious health conditions or want to skip the medical exam, consider purchasing a guaranteed issue policy. These policies are open to anyone — no questions asked — but expect to pay more for coverage.
Why consider taking out a life insurance policy for your parents?
There are a number of reasons to take out a life insurance policy for your parents. Even if you don’t rely on them for financial support, life insurance offers financial protection that you likely won’t find elsewhere. A life insurance policy can cover:
- Funeral expenses. When all is said and done, funerals can cost $10,000 or more. Life insurance can help cover funeral expenses so that you’re not forced to pay out of pocket. Some policies even offer specific add-ons to cover these expenses — something to consider as you shop around.
- Health care. Whether your parents’ health is declining or they have routine medical costs, life insurance can help cover the bills. Depending on the coverage, your policy might offer an early or increased payout to cover medical expenses. Speak with your provider to determine which policy and riders are best for your situation.
- Debt. If your parents have any outstanding debt, be it mortgage payments, credit card bills or anything else, you may be held financially responsible when they die. Life insurance can provide the means to pay off any outstanding debts. Speak with your provider to determine how much coverage you’ll need to pay off debts, medical and final expenses.
- Replacement income. If you, your spouse or other dependents rely on your parents for income, life insurance might be a good idea. Even if you’re eligible for government assistance programs, a life insurance payout can supplement your income to help you remain financially stable after a parent dies.
- Taxes. If you’re responsible for the inheritance or estate tax when a parent dies, it’s likely you’ll pay taxes. How much taxes you’ll pay depends on factors like their state of residence and net worth. There are often thresholds to be met before any taxes apply, but it never hurts to be prepared. Life insurance can help reduce the financial burden of taxes.
- Legacy. Many people purchase life insurance for their parents if they plan to leave an inheritance or legacy to their next of kin. Whether it’s cash, property or retirement funds, life insurance payouts can provide a substantial amount of savings to beneficiaries.
- Charitable donations. If you or your parents would rather donate to a charity, consider doing so through life insurance. While cash donations go a long way, life insurance payouts can provide a much larger contribution since the proceeds are generally tax-free.