Can you buy life insurance for your parents? This is a great question we often hear. Some might encounter some roadblocks when you try to buy life insurance on behalf of your parents. But they can apply for a life insurance policy and list you as the beneficiary.
Say you’ve bought life insurance for yourself and your spouse, but now you’re wondering – do you need to buy life insurance for your parent?
Many of your friends may have seen large benefits and payouts when their parents have passed. You might be wondering if it’s possible for you to get the same. Maybe your parents have cosigned a loan for you, and you’re wondering how you’ll manage to pay it if they die. Maybe your mother is the main source of childcare for your children, and you’re not sure how you’ll make ends meet if she dies. Bottom line, you never know.
Maybe your elderly parents didn’t put aside money for your their end of life costs, and you’re wondering how to mitigate those expenses when they are dead.
Whatever the reason, buying life insurance for your parents can be an appealing option when you want to be fully prepared life’s eventual end. What does that process involve? Keep reading!
- Can you buy life insurance for your parents?
- Can you buy final expense insurance for your parents?
- What are some alternatives to buying life insurance for your parents.
Can you buy life insurance for your parents?
It can be difficult to take out a life insurance policy on someone other than yourself. Even if that person is your parent. When you buy life insurance for yourself, you’re both the policyholder and named insured. In order to take out a policy where the policyholder and insured are two different people, you have to prove you have insurable interest. This means you’ll suffer financially if the person dies. This is hard to prove if you’re an adult child, buying a policy for a parent. It’s usually never approved by insurers. You are not allowed to apply for life insurance for another person without that person’s consent.
You’re much more likely to get life insurance coverage if you help your parent apply for a policy they will own, where they name you as beneficiary. If they do this, you can still pay the premium, even if your parent owns the policy.
Buying final expense insurance for your parents
Final expense insurance is something you can buy on behalf of your parents. Also called burial insurance, it’s a type of permanent life insurance which will last until your parent dies – provided you pay the premiums. You still need your parent’s permission to apply for this type of policy. There is no medical exam, your parent will simply have to answer some medical questions – but the policy won’t be issued if they have a terminal issue
Final expense insurance monthly premiums range from $50 to several hundred dollars, depending on your age and the location. The policies are available for death benefits from $5000 to $25000. If your parent dies within 2 years of the policy being purchased, most insurers will not pay the benefit. They will refund the premium paid.
If you’re worried about being able to pay for end of life expenses for your parent, this type of policy can make sense. If you expect your parent to live longer, it always makes sense to invest the money you would’ve put into premiums and use it to fund the burial. Many people who purchase final expense policies end up paying significantly more in premiums than the death benefit when it’s paid out.
How to apply for final expense insurance for a parent?
- Talk to your parent. The first step is getting their consent. You can’t do it in secret – that’s fraud.
- Get quotes. Final expense insurance costs are based on life and age. You can get an idea by looking online and using calculators.
- Choose beneficiaries. In order to keep the benefit from being taxed, you must ensure there are only two names on a life insurance policy. For example, if you’re purchasing a final expense insurance policy for your mother, and you will be the owner, you need to be named as the beneficiary in order to avoid the benefit being taxed. If your mother is both the owner and the named insured, then any beneficiary can be named without the benefit being ultimately taxed.
Alternatives to buying life insurance for your parents
If you’re worried about being able to afford costs or expenses for your parents, then you have other options.
- Ask your parents to purchase their own life insurance policy and name you as beneficiary.
- Setup a savings account to put money aside for end of life expenses for your parents.
- Pre-pay for funeral costs