Can I buy life insurance for my parents?

You may want to purchase a life insurance policy covering your parents and naming you as the beneficiary if you expect a significant financial impact from their death. Life insurance on a parent can pay for funeral expenses, fund an inheritance, support a charity, cover children’s college expenses, and even support a surviving parent after one dies. However, the parents must consent to you or someone else purchasing life insurance for them. You also need to prove how you will lose out financially when they die. Talk to a financial advisor who can help you with insurance decisions like this.

Can you buy a parent’s life insurance?

Most life insurance policies cover the lives of policyholders who purchased the coverage and named a spouse or other relative as the beneficiary. Buying a policy that covers someone else’s life is more complicated and not even possible unless certain conditions are met.

One such condition is that the purchaser of the policy needs written consent from the insured person or persons. The policy buyer must also prove that they will be financially affected in some way by the insured’s death. However, there are situations where insurance is purchased on the life of someone other than the policyholder. Insurance covering a parent is one of the most common examples.

The pros and cons of buying life insurance for a parent

Purchasing life insurance for a parent can provide significant benefits. However, there are some drawbacks to this. Here are the pros and cons of getting lifetime coverage for a parent:

The pluses include that insurance compensation can:

• Pay the funeral expenses

• Provide an inheritance

• Donate to a favorite charity

• Pay for a child or grandchild’s college

• Financially support a surviving parent after one dies

An advantage that is specific to purchasing a policy for a parent, as opposed to a parent taking out a policy for themselves, is that the policy owner and only the policy owner can name or change beneficiaries.

Disadvantages of parent life insurance include:

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• The insured must sign a consent form and cooperate in the underwriting process, including obtaining a medical examination.

• The policy buyer must prove an insurable interest, which means they will experience a financial impact from the death.

• Without consent and proof of insurable interest, the policy will be refused.

• As with any insurance, the policyholder must continue to pay premiums to maintain coverage.

• The parent must be legally competent to sign the consent form.

A parent’s health can also be a limiting factor. If the parent is unwell, the insurance company may refuse to provide coverage or limit the death benefit to an amount that is too small to help much.

How to determine if life insurance for a parent is the right choice

Here are some cases where it might be worth getting life insurance for a parent:

• When a parent does not have the financial means to pay for their own funeral.

• When a parent can insure end-of-life medical expenses they can’t pay.

• When you have the opportunity to inherit financial obligations, such as a house with a mortgage.

• If you co-signed a loan with your parent.

• If you expect to be responsible for the costs of supporting a surviving parent.

Absent at least one of these situations or some other source of financial impact from a parent’s death, it’s probably not worth trying to get coverage for the parent’s life.

Even if these circumstances exist, buying a policy on your parent’s life may not be the best approach. An alternative is for the parent to purchase a policy and name you as the beneficiary. You can pay the premiums if the parent does not have the financial resources to do so and receive the payout when the parent dies. This avoids the need to obtain consent and prove an insurable interest.

What type of life insurance policy is best for insuring a parent?

When considering insuring a parent, there are three insurance options that may be right for you. Here are three to keep in mind:

1. Term insurance is probably the best type of insurance for a parent. It is one of the cheapest life insurance policies and has features that make it suitable for this type of risk management.

2. Final expense or funeral cover is another option. This type of policy can pay for medical bills and funeral expenses. However, it is expensive.

3. Whole life is another popular variety of life insurance. It has a number of features that are not necessarily helpful in managing the financial consequences of a parent’s death. And it’s usually significantly more expensive than long-term life.

Managing a parent’s insurance costs

To keep a parent’s insurance costs manageable, consider the financial impact of the parent’s death and limit the benefit amount to the expected duration of the impact. Paying for more coverage than necessary will increase the premium.

Also, opt for term life insurance. Premiums for a term policy are likely to be lower than for other types of coverage. Finally, start shopping for a policy as soon as you know you’ll need it. As a general rule, the younger and healthier your parent is, the lower the premium will be.

The bottom row

You can buy life insurance cover for your parent if you get their consent and you can prove that you will suffer a financial loss if they die. Parental life insurance can be a good idea if you expect to have to pay funeral expenses or medical bills after your parent’s death, or if you’ve cosigned loans or just want to provide an inheritance. If you do decide to get a policy for a parent, you’ll probably want to use term insurance instead of one of the other types of policies.

Estate Planning Tips

• A financial advisor is well equipped to assist you with decisions about using insurance to manage financial risk. SmartAsset’s free tool connects you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches for free to decide who is the best fit for you. If you’re ready, find an advisor who can help you reach your financial goalsstart now

• You can get an idea of ​​what a $250,000 term life insurance policy would cost for a healthy non-smoker at various ages from SmartAsset’s term life insurance quote resource. This useful tool offers a range of premium levels for male and female insureds and can quickly connect you with insurance companies for actual quotes.

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