How To Buy Life Insurance for Parents

Parents often purchase life insurance to protect their surviving spouses and children. But that's not the only way to use insurance. In some cases, it makes sense for the child to buy life insurance for the parents.

Losing a parent can be emotionally devastating and an unpleasant subject to consider. But it is important to recognize any possible financial impact that could result.

For example, if your parents provide financial support or if you are responsible for the debts that your parents currently pay, your death may put you in a difficult position.

Alternatively, you may want sufficient funds to pay for a meaningful tribute celebrating your parents' lives.

Can you buy life insurance for your parents?

You can buy life insurance on behalf of a parent and you can even become the beneficiary. However, you must meet certain requirements to do this.

To buy life insurance for someone else, you must have an insurable interest. In other words, there must be a negative financial, or in some cases emotional, impact on you as a result of the death of the insured. Often times, family members (including parents) automatically meet the criteria.

Consent is essential. Generally, the person you are insuring must know about and accept any policy that covers his life.

Some terms can help solidify the concepts of buying life insurance for your parents. For example, when purchasing coverage, you can be the policy owner and your parents can be the designated policy holder.

Policy Owner: The policy owner registers and controls the policy and is generally responsible for the premiums. Unless there are restrictions, the policyholder can change the beneficiary, cancel the policy, and take other actions.
Named Insured: The Named Insured is the person whose life is tied to the insurance policy. The death of the named insured triggers the payment of the policy.

Why should you buy life insurance for your parents?

There are several valid reasons to buy life insurance for a parent. Some life insurance benefits may even go into effect before the death of the policy holder.

Pay debts

If the death of a parent causes financial hardship, it may make sense to purchase life insurance for them. For example, you may want to protect yourself and your immediate family if you applied for a loan to help a parent borrow money.

Alternatively, you (and your siblings) may want to keep a family home with an outstanding mortgage debt, but don't have the funds to pay the mortgage. In cases like this, life insurance can eliminate debt and make the loss a little more bearable.

Provide family members

If you have siblings or other family members that your parents support, you can buy life insurance that provides funds for these people. In particular, people with special needs may need additional financial support and life insurance can provide these funds.

Cover final expenses

You can also purchase a life insurance policy to help with final expenses after the death of a parent, including costs for the funeral, funeral, travel costs for participants, and related expenses.

Taking care of life

Life insurance can provide funds while your parents are still alive. If your policy includes an anticipated death benefit (ADB), you may have access to a portion of the death benefit before a parent dies. This can be particularly helpful if a parent is facing high medical bills or needs long-term care. However, beneficiaries would receive less money in this case because you take a death benefit advance from the policy when you exercise ADB.

Decide how much you need

Choosing the right death benefit can be challenging. A larger death benefit is always better, but you pay higher costs to protect yourself. Decide how much death benefit to pay, and then see if you can afford that amount of coverage.

For example, you can buy insurance to support a sibling with special needs. To arrive at an adequate amount, calculate the total amount that will provide the resources your brother will need for the rest of his life. A financial planner or insurance agent can help you complete these calculations.

Remember that any asset that you and your siblings inherit can reduce the amount you need.

 

We hope you enjoy watching this video about How To Buy Life Insurance for Parents

Source: Rob Gill - EPIC Financial Strategies

 

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