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If your parents’ finances aren’t stable or you know they won’t leave enough money to cover their final expenses, what do you do?

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Is life insurance an option? What if your parents don’t carry life insurance, can you take it for them?

Some children carry life insurance for their parents, but you must meet specific requirements before considering it. Check them out below.

Reasons to Consider Life Insurance for your Parents

First, let’s consider why you’d buy life insurance for your parents. Isn’t it your parents’ responsibility to cover it?

Think about this. Many parents buy term life insurance when they have young families. They make sure the surviving spouse and children have enough money to thrive in their absence. Once the children grow, many parents don’t renew their policies, assuming they no longer need the coverage.

But that’s often not true. Parents may leave behind:

  • Unpaid bills, such as a mortgage or credit card bills
  • Final expenses (burial, funeral, medical expenses)
  • End-of-life wishes you can’t afford

Think of all the expenses you’d incur when a parent passes. Are both parents alive? Would you move the surviving parent to a senior home or closer to you? Can you afford the moving costs? Can you afford the costs of a senior home or medical costs?

How Will Buying Life Insurance Help your Parents?

she is trying to convince her mother

You need your parent’s consent to insure them. Without permission, it’s insurance fraud. Convincing your parents may feel harder than buying the policy. Knowing how life insurance helps them may help facilitate the conversation. Consider these facts.

  • Life insurance provides you (the children) with peace of mind knowing you can meet your parents’ final wishes
  • If your parent’s home has a mortgage or other bills that will lower your inheritance, life insurance proceeds offset the costs
  • The proceeds may help a surviving spouse live comfortably, whether in their home or somewhere else

Talk to your parents about their financial status and how you think life insurance will help you and any other beneficiaries when they pass. We know it’s difficult to talk about your parents dying, but it’s essential to talk about the financial aspect of it before it’s too late.

So, if you’re wondering:

Can I get life insurance on my parent without them knowing?

The answer is NO.

If your parents agree to let you buy life insurance for them, they must sign a consent form, which is usually the application. Don’t worry if you aren’t physically with them; many insurance agencies accept virtual documents or even verbal consent over the phone. Some policies require a medical exam too, which would be your parents’ additional consent since they have to allow the exam.

Proper Coverage for Parents Life Insurance

Buying life insurance for parents has the same complexities as buying your policy. Consider the type and coverage amount carefully.

Term life insurance – Term insurance ends on a specific date. If your financial needs are time-sensitive, such as covering a mortgage or other substantial debt, term insurance may be enough. If there are enough funds for final expenses and other end-of-life costs, consider term life insurance.

Permanent life insurancePermanent or whole life insurance doesn’t expire as long as you pay the premiums. Choose this option for end-of-life expenses, legacy arrangements, or for estate planning.

Final expense insurance – This covers (as the name suggests) final expenses, such as burial, funeral, and final medical costs.

Also, consider your parents’ age, health status, and lifestyle. Ask yourself:

Would they pass a medical exam? If not, choose a guaranteed life insurance policy or no medical exam policy. You don’t have to worry about a denied application, but you’ll pay higher premiums.

Do your parents have minor health issues? A simplified life insurance policy offers a cross between a fully underwritten policy and a no exam policy. If your parents don’t have major health issues, such as heart disease, diabetes, or a chronic illness, a simplified life insurance policy offers lower premiums than a guaranteed policy but doesn’t require a medical exam.

If your parents are in good health and don’t mind the medical exam, choosing a fully underwritten policy provides the lowest premiums.

How Much Coverage do Your Parents Need?

The amount of coverage depends on your parents’ needs. Have that tough conversation about their finances, including assets and liabilities. Find out where they stand.

Can they cover their final expenses? The median funeral costs $9,135, but budget higher for any last wishes, medical costs, and unexpected charges.

If you need something more than final expense insurance, determine what you’re covering. Is it a combination of final expenses, liabilities, and estate planning? What amount would pay the costs incurred when your parents die and leave behind the legacy they desire?

Talk to your parents early on to know where they stand financially and what they want to accomplish.

How do you Get Life Insurance for your Parents?

After talking to your parents, shop around for the best policy based on your policy type and coverage determination.

Make sure you can prove insurable interest. Family members almost always qualify, but just in case, you must prove your parents’ death financially affect you before you can buy a policy.

Look for policies with the best coverage (read the fine print) at the most affordable premiums. Before you buy a policy, consider who will be the owner and the beneficiary. You already know who the insured is – your parents.

This is important:

To avoid a tax liability on the proceeds, you must be two of the three people named on the policy. For example, you buy a life insurance policy for your mom. Your mom is the insured, and you are the:

  1. Owner – You hold the policy and pay the premiums
  2. Beneficiary – You receive the proceeds when your mom passes

If you aren’t two of the three, and the policy is worth more than $15,000, the maximum gift allowed without taxation, the beneficiary may owe taxes on the proceeds. For example, you buy mom a $50,000 life insurance policy and name your son as the beneficiary.

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Here’s what happens:

  1. Insured – Mom, the policy pays out when mom passes
  2. Owner – You hold the policy and pay the premiums
  3. Beneficiary – Your son receives the proceeds when your mom passes, triggering a tax liability

Choose your policy, make sure your parents sign the consent forms, and understand the next steps, especially if they need a medical exam. Pay the premiums, and coverage begins.

Life insurance for your parents protects your parents and yourself (or other family members). If your parents’ financial status concerns you, and you wonder how you’ll cover their end-of-life expenses or anything they leave behind, consider a policy that provides peace of mind and allows you to enjoy your parents’ final years.