If your parents don’t have an insurance policy or the funds to pay their own way in their later years, you can buy life insurance for your parents yourself, assuming they’re on board and can qualify for coverage.
However, buying your parents life insurance isn’t like getting them a surprise birthday gift. To take out a policy on someone’s life, you need their consent. This means your parents will have to agree to become insured. They may have to take a life insurance medical exam as part of the process as well. The cost of their policy isn’t affected by who pays the premiums.
To get life insurance for your parents, you need two things: an insurable interest in their lives (meaning you will suffer if they die), and their permission. In addition to an insurable interest, you need your parents’ permission. If you do not get your parents’ permission, you cannot buy life insurance on them, even if you have an insurable interest. Life insurance premiums are cheaper when you are younger and healthier. If you are trying to buy life insurance on your parents, expect higher premiums and lower death benefit coverage amounts.
There are a number of reasons to take out a life insurance policy for your parents. Even if you don’t rely on them for financial support, life insurance offers financial protection that you likely won’t find elsewhere. A life insurance policy can cover:
- Funeral expenses. When all is said and done, funerals can cost $10,000 or more. Life insurance can help cover funeral expenses so that you’re not forced to pay out of pocket.
- Health care. Whether your parents’ health is declining or they have routine medical costs, life insurance can help cover the bills. Depending on the coverage, your policy might offer an early or increased payout to cover medical expenses.
- Debt. If your parents have any outstanding debt, be it mortgage payments, credit card bills, or anything else, you may be held financially responsible when they die. Life insurance can provide the means to pay off any outstanding debts.
- Replacement income. If you, your spouse, or other dependents rely on your parents for income, life insurance might be a good idea. Even if you’re eligible for government assistance programs, a life insurance payout can supplement your income to help you remain financially stable after a parent dies.
- Taxes. If you’re responsible for the inheritance or estate tax when a parent dies, you’ll likely pay taxes. How much taxes you’ll pay depends on factors like their state of residence and net worth. There are often thresholds to be met before any taxes apply, but it never hurts to be prepared. Life insurance can help reduce the financial burden of taxes.
- Legacy. Many people purchase life insurance for their parents if they plan to leave an inheritance or legacy to their next of kin. Whether it’s cash, property, or retirement funds, life insurance payouts can provide a substantial amount of savings to beneficiaries.
- Charitable donations. If you or your parents would rather donate to a charity, consider doing so through life insurance. While cash donations go a long way, life insurance payouts can provide a much larger contribution since the proceeds are generally tax-free.
So, whether you are worried about covering final expenses, paying off your parents’ debt, or other obligations, Spencer Insurance Agency, Inc. can provide coverage from many insurance carriers so you receive the life insurance for your budget and needs! You can reach us at (215) 885-2200 or visit us online at https://spencerinsurance.com/.
Source: https://www.nerdwallet.com/article/insurance/life-insurance-for-your-parents and https://www.businessinsider.com/personal-finance/buying-life-insurance-for-parents and https://www.finder.com/life-insurance-for-your-parents