Can you take out life insurance for your parents? The answer is yes. But before you can buy life insurance for a parent, their consent must be given and they must be legally competent to sign the paperwork. It’s illegal to insure your mother or father without their consent. We are pretty sure no insurer will approve such.
Beyond seeking the written consent of your parents before approving a policy, you will be required to provide insurable interest.
What is insurable interest? This is proof that you are going to suffer a financial loss should your parents die. In insurance law, you can only buy insurance for someone you have an insurable interest.
A Brief Summary of How Life Insurance for Parents Work
Do your parents have an active life insurance policy that can take care of the financial burden of their final expenses when they pass on? If no, you can buy the best life insurance for parents once you ascertain their eligibility.
You may need to start by asking them if they have an existing coverage in the past. If they do, find out if they are still paying the premium and can access the financial records. This will help you know how best to proceed.
The financial burden of supporting aging parents can be reduced if you have the right policy. Should you purchase life insurance for the elderly? Wait until you read these advantages of buying life insurance for your parents.
5 Benefits of Buying Life Insurance for Your Parents
Beyond buying life insurance for the entire family, it will make financial sense to also get coverage for someone else that you have an insurable interest. That way, when the insured person dies, you as the policyholder will be paid a lump sum of cash.
You can use the death benefit to pay for their burial arrangement, settle their outstanding debts and mortgage or use it for anything else you deem fit. Below are some interesting reasons people buy life insurance for their parents:
1. It can help you pay for your aging parents’ caregiving
Caring for an aging parent can be quite expensive. It requires a lot of time and can be draining if you are not co-ordinated. The worst part of this phase of life will be if they have any health challenge that requires them to be taken care of. Your personal finances might not be enough at this time and you will need insurance to help you offset some bills.
What happens if after their health challenges drained you financially and they later pass on? How can you pick up yourself financially? How can you raise funds for their burial expenses? This is where life insurance for parents comes in. This policy pays you a death benefit when your parents pass on. Some policies can also allow you to withdraw a certain amount of money while they are still alive under unique circumstances.
2. Your parents’ health expenses can be taken care of while they are still alive
Your parent doesn’t need to die before you can access some of the privileges that come with life insurance. There are some forms of life insurance that come with a cash component that you can easily access. This accessible benefit can help you settle their medical bills and hire a caregiver.
A quick look at life insurance for seniors shows that a 75-year-old spends an average of $7,000 on medical expenses yearly. This is often why it’s more expensive to buy life insurance for elderly people over 70 years.
3. It takes care of your parents’ funeral expenses
How much does a funeral cost in the United States? According to a press release made available by the National Funeral Directors Association, the average cost of a funeral in America is $9,000. This doesn’t include common costs like cemetery property, markers, etc.
You will need to buy a casket, pay for a space at the cemetery, transportation and conduct other activities. All these put together will dig a hole in your pocket. In order to recoup the expenses or transfer that burden to someone else, you need to get life insurance for your parents.
4. If your parents were in debt, the death benefit will pay for it
Life insurance can be used to pay off debts if the person dies unexpectedly. You won’t have to inherit debt from your deceased parents if you purchase adequate coverage for them.
Any pay-out made to the beneficiary of a life insurance policy is always tax-free. Where there’s no debt or mortgage to pay, you are free to use the lump sum for anything of your choice.
5. You can help your parents fulfill their wishes using the death benefit of their life insurance policy
Parents have a variety of wishes. Some desire that a memorial building is built in their honor. Some want to give to charity or missionaries. Through the proceeds of their life insurance policy, you can help them carry out their wishes. There are cases where a parent may choose multiple beneficiaries for their life insurance policy.
Now that we’ve established the importance of purchasing life insurance for parents, let’s discuss the one that is most suitable for new parents.
What Type of Life Insurance is Best for New Parents?
The best type of life insurance for a new parent is term life insurance. It’s the most sufficient type of insurance for new families. This is because of its affordability and ease of comparing quotes. You can easily compare life insurance quotes online.
A term life insurance policy between 20 to 30 years secures new parents as they wait for their children to start coming. The most appropriate time to get life insurance is before you have children so you can protect your family from the beginning.
What is the average cost of life insurance for parents?
Our finding shows that the average cost of life insurance for a family of four is $147 per month. This is for a term life insurance policy of 20 years. It will provide them a death benefit of $500,000.
If you are in your early 30s and you want a 30-year life insurance plan as a new parent, you will pay $13 per month. The bottom line is that the younger you are, the more affordable your life insurance quote will be.
What Are the Factors to Consider When Choosing the Best Life Insurance Quotes for Parents?
There are quite a lot of factors that determine the life insurance quotes for parents. In trying to explain these factors, we shall be discussing the various life insurance plans and exactly how they work. These factors include but are not limited to:
The earlier you are able to buy life insurance for your parents, the better. Research has shown that cost of life insurance is always lower when you are much younger and healthier. Here’s an article that explains how age affects the life insurance rate.
If your parents have underlining health issues or age is no longer on their side, experts recommend you get a guaranteed issue life insurance plan for them. Even if they can’t qualify for other policies due to health challenges, you can always bank on this type of policy.
Another factor that can influence the life insurance rate for parents is the insurable interest. As we explained earlier, your insurable interest is the extent of financial loss you will experience if the insured passes on. If your insurable interest is high, your premium will be high as well as the death benefit you will receive as the beneficiary.
Your lifestyle can increase your life insurance premium. If you work in a risky job as gas, electrical or heating engineer, your life insurance premium will be higher. If you smoke, your premium will be higher.
Every family has its financial goals. If you are looking for a great plan that will last your parents for the rest of their life, getting permanent life insurance is the way to go. The only downside of this plan is that it’s way more expensive than a term life insurance policy. And the advantage is that it provides you a guaranteed source of funds to replace lost wages.
If you are on a shoestring budget you may want to cover only the cost of conducting your parent’s burial expenses. That way, it won’t eat into your pocket when your parents pass on. This is where funnel expense life insurance comes in to cover the burial expenses and other related costs. Funeral expense life insurance for parents is way more affordable compared to a permanent life plan.
10 Important Life Insurance Statistics You Need to Pay Attention to in 2023
- According to LIMRA, 70 percent of Americans said they needed a life insurance policy in 2020.
- 50% of all people searching for life insurance tend to value convenience, speed, and simplicity in underwriting over all other factors.
- According to a study by Statista, only 52% of Americans actually had life insurance coverage as of 2021.
- A survey shows that 29% of Americans prefer to purchase life insurance online.
- After-tax income for the life insurance and annuity industries fell 50 percent in 2020 compared to the previous year, according to S&P Global.
- The average cost of a life insurance premium for a 50-year-old is more than twice as expensive as it is for a 20-year-old, according to data from ValuePenguin.
- COVID-19 prompted 1 in 5 Americans to purchase life insurance, according to a recent survey by LIMRA and Life Happens.
- A study by LIMRA shows that 33 percent of American people don’t think they would qualify for life insurance.
- The same study by LIMRA reveals that 50 percent of people overestimate the cost of life insurance as more than three times what it actually costs.
- Based on research conducted by Statista, the average life insurance payout is roughly $168,000 in the United States.