The Complete Guide to Buying Life Insurance for Your Parents
Can You Get Life Insurance for Your Parents?
Yes, you can purchase life insurance for your parents to help cover the final expenses they leave behind. Doing so can provide peace of mind for you and your family during this difficult time. In order to buy a policy on a parent, you will need their consent along with proof of insurable interest. The type of policy you buy will depend on their age, financial situation, and their overall health. Having life insurance is essential when it comes to preparing for the passing of a loved one (learn what to do when a loved one dies). It’s imperative to purchase a policy that will offer the most support for you on one of the worst days of your life.
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Step-by-Step Guide to Buying Life Insurance for Parents
When buying life insurance, we often only think about whether we need to purchase a policy for ourselves. The reason we purchase life insurance is to protect our loved ones from experiencing a financial burden when we pass. Part of protecting them is protecting yourself, especially from unforeseen bills that could impact you financially.
Many times when a parent dies, surviving loved ones are left with the bills and may not have the resources needed to handle any end-of-life expenses their parents might leave behind such as medical bills or hospice care. Not to mention the thousands of dollars needed to cover their funeral expenses.
The following steps can help protect you from experiencing a financial burden when your parents pass:
- Find out how much coverage they need. The average cost of a funeral can be $9,000 or more depending on the style of service. This cost may not cover additional services, such as transporting the remains, the use of a funeral home for viewing, buying a tombstone, or purchasing a burial plot. Getting estimates from several local funeral homes can help you determine the final cost and give you an idea which services are right for you. Finally, add any debt or final expenses your family might be left with such as unpaid medical bills. You should then have a clear idea of how much life insurance to buy.
- Find a policy that fits their needs. There are several different types of life insurance policies available today. Before choosing a policy, it’s important to take a close look at what it’s offering and make sure it specifically covers the things you need covered. Just because a plan is cheaper on a monthly basis, doesn’t mean it’s the best policy for your situation.
- Decide who will own and pay for the policy. In most cases, you’ll need your parent’s consent to buy a policy for them. Usually this consent is obtained by having them sign the insurance application. In some cases, a medical exam (also called a life insurance exam) will need to be performed.
In order to purchase insurance for someone else, you must be able to demonstrate what’s called “insurable interest”. Typically, a person has insurable interest if they would be financially impacted by the death of the insured. Family members usually have automatic insurable interest.
Apart from demonstrating you have insurable interest, some companies may require the insured to take a medical exam to qualify for insurance or sign an application. These requirements depend on a variety of factors, such as the coverage amount.
For smaller policies, some companies will offer life insurance without a medical exam. These policies are usually issued based on answers to health questions on the application.
Your circumstances will determine who is in the best position to own the policy. Typically, the person paying the insurance premiums is also the owner of the policy. Some policies may require a specific person be the owner. Your insurance agent can help you choose the best owner and can walk you through the options available.
No matter who owns the policy, it’s important to make sure it’s easily accessible. Make sure the owner understands their responsibility and is willing to be the point of contact with the insurance provider.
SEE WHY FAMILIES CHOOSE FUNERAL ADVANTAGE
What is the Best Life Insurance for Parents?
Besides your parent's overall health, their age is one of the biggest factors in determining what life insurance is best. Different age groups will need to protect different things.
Age 25-40: With younger parents, a term policy usually makes the most sense because you're looking to protect things like your mortgage and car payments. With term insurance, you tend to have a lower monthly premium and the coverage amounts are much higher because term insurance is primarily used to replace any income a family would lose. The coverage only lasts for a set term (usually 10 – 30 years) and these plans generally require medical exams to qualify.
Age 40-85: Whole life insurance is typically the best option for parents near or after retirement. These policies usually build cash value and do not stop covering you after a certain time frame as long as premiums are paid. In most cases, you can qualify without taking a medical exam, even if you’ve had trouble qualifying in the past. The younger and healthier you are, the lower your premium will be, so it’s important to lock in a low rate early on in case your health changes. Seniors over 60, and especially seniors over 70 and over 80, pay much higher rates than younger parents.
Can You Get a Policy for Parents Without Their Consent?
In most cases, the answer is no. If you’re struggling to talk to your parents about taking out a policy for them, you’re not alone. Talking with your parents about life insurance and their final arrangements isn’t easy. But having this discussion can be helpful in many ways. Eighty-nine percent of adults over the age of 40 say discussing end-of-life wishes would be meaningful.
Explaining the purpose of the discussion is very important. Make it clear that your intention is to support their wishes exactly as they describe. Set aside a time to discuss how they wish to be remembered and determine how much life insurance is needed to pay for their final arrangements.
If you need help on how to have this talk, visit The Conversation Project to get tips and tools on how you can make the discussion as smooth as possible.
Once your parent understands the necessity of life insurance, you can follow the step-by-step instructions listed above.
What Amount of Coverage is Best?
The answer to this varies from person to person. You should factor in your parents’ total debt, any monthly expenses/medical bills, and the type of funeral services they wish to have. With the average funeral costing around $9,000, funeral expenses aren’t something that most Americans can easily afford at a moment’s notice. The federal government only pays your family $255 – and only if you qualify. This leaves a large chunk of funeral expenses that must be paid for by surviving loved ones.
To help cover your parents’ funeral expenses, you can buy a specific type of life insurance called final expense insurance. It’s specifically designed to help cover final expenses such as unpaid medical bills, funeral arrangements, and any other end-of-life expenses (learn more about pre-paid funeral plans).
A life insurance agent can help you find the right amount of coverage that would suit your needs.
How Much Will it Cost?
The cost of life insurance is calculated using several factors. The age and overall health of the insured are weighted the most. Term insurance is usually more affordable but can be difficult to qualify for if you have pre-existing conditions and have to take a medical exam. Whole life policies tend to carry a higher premium, but also include benefits that most term policies do not have (including cash value and faster claim payouts in some cases).
Ultimately, the amount of coverage you take out will determine how much it will cost.
Affordable Life Insurance Options for Parents
When searching for insurance for your parents, you may already know that it can get very expensive. Thankfully, there are types of whole life insurance such as burial insurance that specialize in small face life insurance policies (see also Burial Insurance for Seniors). These allow you to budget accordingly when taking steps to secure your family's peace of mind, regardless of your financial situation.
One way to keep life insurance costs low is to buy life insurance early on before your age or health affects how expensive your premium is. If you’re able to qualify for a standard life insurance plan, you can save hundreds of dollars a year in premium costs. If you’re unable to qualify for a standard plan because of your health, your premium will be more expensive because of the extra risk the insurance company takes on by insuring you. Tobacco users will also pay a higher premium because of the long-term impact tobacco use has on a person’s health. By getting life insurance early on, you will be able to lock in a standard rate even if you experience changes in your health.
Why Funeral Advantage?
Although no one wants to think about the death of their parents, the reality is they will most likely pass before us. This often means the next of kin – usually a child – is left to handle their final arrangements.
Funeral Advantage was specifically designed to help families with funeral expenses. Funeral Advantage is made up of two partners: Lincoln Heritage Life Insurance Company® and the Funeral Consumer Guardian Society® (FCGS).
There are two parts to the Funeral Advantage program:
The first is a final expense life insurance cash benefit offered by Lincoln Heritage. We offer easy qualification – no medical exam, just health questions on a one-page application. Most people can qualify, even if they have health issues. We pay approved claims within 24 hours. With rates as low as $15 a month, Funeral Advantage is an affordable life insurance option that can be tailored to fit any budget.
The second is the family support services offered by the FCGS. Every Funeral Advantage policy comes with a free membership with the FCGS which allows members to document their final wishes.
For years, the FCGS has helped its members save hundreds – even thousands – of dollars on funeral arrangements. Upon the death of a Funeral Advantage member, the FCGS will help surviving loved ones cope with the many details that immediately arise. The FCGS will go above and beyond contacting several local funeral homes to ensure you get the best price for your services. This takes a huge burden off your family’s shoulders and provides the space for them to grieve and know everything is being taken care of.
Buying life insurance for your parents is a thoughtful and caring decision. By doing so, you help ensure the funds will be there to carry out their final wishes and give them a respectable funeral.
Lots of life insurance policies can help you with this, but there’s only one that includes a free membership with the Funeral Consumer Guardian Society: Funeral Advantage. Arranging a funeral can be stressful and expensive, but Funeral Advantage is here to make it easier.
What Are Some Reasons to Buy Life Insurance for Parents?
- You need help paying for their final arrangements. The costs of funeral services are more expensive than they have ever been and they will continue to rise. Many families underestimate just how expensive funerals can be depending on the type of final arrangement (funeral or cremation) and the items chosen for the service (casket or urn, flowers, obituaries, transportation, use of funeral home for viewing, etc.). Caskets alone can cost families thousands of dollars. Life insurance proceeds can help cover some of these costs, especially if the benefit is received quickly.
- You need help paying for their medical bills. The last few years of a person’s life can often be some of the most expensive. Depending on their health, your parents may be placed on expensive prescriptions or medical treatments, require more doctor or hospital visits, and may need around the clock care. In the final days of their life, they may need to be placed in a hospice facility. All of these medical expenses can be difficult to cover if you have a family of your own. A small life insurance policy can help cover any medical bills left behind.
- You need help moving your surviving parent. When one of your parents passes away, it can be difficult for the surviving parent to live alone. A lot of children will move their surviving parent closer if they live out of state or move them into an assisted community. The process of selling their home and moving them can cost thousands of dollars or more. Buying life insurance for your parents can help cover these costs and keep you and your loved ones from paying thousands of dollars out of your own pocket.
No Medical Exam Life Insurance Options
Medical exams can prevent you from qualifying for a policy if you have health issues. If your parent does have a pre-existing condition, there are still options available. A majority of whole life polices (including burial and final expense) do not require a medical exam. Coverage can often be issued by answering a few health questions on the application.
- Are there tax considerations?
- Usually life insurance benefits are tax free but there can be exceptions. Check with your local tax advisor to find out how you should report any insurance benefits you receive.
- Should I use a broker or an agent when buying life insurance?
- A broker is someone who represents multiple insurance companies. An agent is generally appointed with one company and can only offer that company’s product. A broker has the ability to show you more options, but could sway you in the direction of a policy where the broker receives the most commission. An agent is more likely to be an expert on the product they offer, and is generally selling those policies exclusively because they believe it to be the most beneficial for the insurance buyer and themselves.
- Should I buy whole life insurance or term insurance?
- With term coverage you have the option to choose the policy length. For example, if you choose a 10 year term the coverage will expire after 10 years and you will need to get a new policy (and re-qualify in some cases). With whole life, you are covered until death as long as premiums are paid. A basic rule of thumb is that term coverage tends to be for younger applicants and whole life coverage is for older applicants.