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How to Buy Life Insurance for Your Parents
March 17, 2020
If you want to help your parents cover their final expenses, debt, or other financial losses when they pass away, you may be able to buy life insurance for them. But buying a policy for the people who raised you is more complicated than buying a policy for yourself.
You’ll need your mother’s or father’s consent and, likely, their active participation in the application process. Choosing the right life insurance coverage can be a challenge, too, because age caps on some products begin as early as 60. Finally, in some cases, it will make more sense for your parents to buy their own policy.
Talking about money and end-of-life planning with your parents can be challenging, so prepare for the conversation by beefing up your knowledge. Here’s what you need to know about buying life insurance for your parents.
Why buy life insurance for a parent?
People buy life insurance for their parents for two main reasons:
- To cover final expenses such as medical bills or a funeral.
- To account for lost financial or household assistance parents might provide.
A funeral or burial can be very expensive, and, when it’s over, you might have to address outstanding debts a parent has that are not forgivable upon death. Getting a life insurance policy can help with that.
Or maybe your parents live with you and help cover your mortgage. Or maybe they watch the grandkids when you and your spouse work or enjoy a weekly date night. In each of these situations you would have a reasonable expectation of a financial loss if your parent passes away. In insurance-speak, this expectation is called insurable interest, and it’s a legal requirement for buying life insurance on someone else.
Should you buy life insurance for a parent?
Whether or not you can buy life insurance for your parents, consider whether you should. Could your parents buy a policy for themselves? If so, it might be easier if they apply for coverage in their own names. You won't have to worry about meeting any requirements for insurable interest, nor will you have to share your personal information with the insurer.
But if your parents can’t afford life insurance premiums, or they want you to have control over the policy in case they become incapacitated, it may make sense for you to purchase the life insurance policy instead.
If your primary reason for buying life insurance for your parents is to ensure you receive an inheritance, you might have trouble securing a policy. Again, you’ll have to prove you have insurable interest in their lives if you want to buy life insurance on them.
When you purchase life insurance for yourself, it’s usually a straightforward process. But when you buy a policy on your parents, you'll need their consent and, typically, their participation in the application process. Here’s how to get the process started.
Talk to your parents about life insurance and finances
Talking to family about money can be hard. Because your parents have always looked out for you, it can feel awkward to flip that role and ask about their finances. Many adult children also want to avoid making it sound like they’re trying to secure an inheritance.
But having these tough conversations is critical for getting parental consent and ensuring participation in buying a life insurance policy.
Consider bringing up the topic of life insurance as part of a broader discussion about funeral wishes and estate planning. If it helps get the ball rolling, tell your parents you’re mulling over the same ideas with your spouse or children, and ask your parents how they made those choices. Or, if it feels right, just ask.
Choose a life insurance policy and company
Once your parents are on board, it’s time to talk about your options. You’ll probably want to consider the following types of life insurance:
- Term life is the cheapest, most straightforward life insurance, but most term life policies will cover your parents until they are 80 or 85 years old and no further.
- Whole life will cover your parents for life, but it’s also typically the most expensive kind of policy.
- Guaranteed issue is a type of no exam life insurance, and your parents can’t be turned down for this coverage. Unfortunately, these policies usually cost a lot and provide only small coverage amounts ($10,000 to $50,000).
- Final expense policies are designed to cover end-of-life expenses such as funeral and medical bills, so death benefits are typically small. Still, these policies are popular among older adults who don't have a mortgage or other financial responsibilities.
While the above policies are among the most common options for buying life insurance on your parents, this isn’t an exhaustive list. You should check out other types of life insurance, and if you still have questions talk to an independent, licensed agent who can point you toward the right policy—and the right company—to match your needs.
How to apply
Once you’ve chosen a policy and company, it’s time to apply for coverage. Your parent will need to share private information with the insurer. This information will likely include a complete medical history, current health information, and perhaps a medical exam.
Make yourself available to help during this process. Your parents will have to go over a lot of information, and offering an extra set of eyes or help staying organized can be a comfort. Also, be prepared to share some details about your own finances and why you want to buy a policy for your parents.
Once you finish the application, coverage will begin as soon as the insurer approves the policy and you pay the first premium, so don’t forget to write that check. Your agent might ask for the first premium payment when you turn in the application. Paying up front streamlines the process and allows you to backdate coverage to your application date.
As with any life insurance application, the insurer may decline to cover an applicant who has a preexisting condition or who has aged beyond what the company will cover. To have the best chance of approval, shop around to find the best life insurance company for your situation.
The best life insurance for parents
Choosing the best life insurance company for your parents will depend on your family’s situation and goals. The age and health of your parents will also affect what options are available.
If your parents are 60 or older, it might be best to start with the Best Life Insurance Companies for Seniors. If they’re younger, check out the Best Life Insurance Companies in the US.
Or, if you want to crunch some numbers first, you can compare quotes from a few companies to get an idea of pricing.
Buying life insurance on your parents isn't always a fast or straightforward process, but don't put it off or shy away from bringing up this tough conversation. Taking care of your and your parents' financial health can be an act of love for your whole family. And when you find the right policy for your parents, the awkward moments, complicated paperwork, and shopping around will all be worth it.
