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Buying life insurance is an important process, but it can also be difficult, especially if you are looking to buy coverage for your family. One of the commons questions that we get is from people trying to buy insurance coverage for their parents.
After 6 minutes of reading this article, you will be equipped with the knowledge to confidently offer advice and help to your parents for buying life insurance.
- Can I Buy Life Insurance for My Parents?
- Can I Get Life Insurance without their Consent?
- Is Buying Life Insurance for Parents a Good Investment?
- 3 Expert Tips for Buying Life Insurance for Parents
- Different Types of Life Insurance Policies for Parents
- The Best Way to Apply for Life Insurance for Parents
Now, let’s get started with a few common questions we get about securing life insurance for parents.
Can I buy life insurance for my parents?
Yes! First of all, this is legal and happens every day.
The requirements for buying life insurance for parents are:
- Your parents must know about it
- They must sign an application
- They complete the free life insurance medical exam
If you’re able to meet all 3 of those requirements, you won’t have any issues.
Can I pay for my parents’ life insurance policy?
Yes. This happens all the time. This is a great way to give coverage to your loved ones. You just need to make sure you structure the policy correctly and apply for a modest amount of coverage.
Can I get life insurance for parents without their consent?
No. The only scenario where consent is not required is if a parent takes out a policy on a child who is still a minor.
Purchasing life insurance on someone else without their consent is considered insurance fraud and is illegal.
Is buying life insurance for parents a good investment?
If your parents can qualify for a Standard or better health classification, life insurance can be a great way for your parents to leave you something when they pass. If your parents are under the age of 75 and have a normal life expectancy (no major health issues), in most cases, it’s a very efficient way for your parents to leave a legacy.
If your parents have moderate or severe health issues, the costs become more prohibitive. You’ll want to contact us to go over their rates to determine if this is financially viable.
Reasons to Purchase Life Insurance for Your Parents
There are many good reasons to purchase a life insurance policy for your parents.
Paying for Final Arrangements
With the insurance policy, you will have help paying for all of their final arrangements. With funeral expenses rising each year, many families tend to underestimate how much the costs can begin to add up.
You have to consider flowers, the cost of the obituary, transportation, the casket or urn and anything else you may need or want to have at the service. The life insurance policy can help cover some of the cost.
Help with Medical Bills
From costly prescription medications to medical treatments and more, all of these costs quickly add up. With doctor and hospital visits added in there and sometimes around the clock or even hospice care, you may find it increasingly difficult to keep up with all the bills. Some life insurance policies will help cover these unpaid expenses that are left behind.
Help with the Surviving Parent
It is often difficult for the surviving parent to live alone when their spouse passes. For this reason, many people move their surviving parent closer or into an assisted living community. The process of downsizing and selling the home and the overall move can cost thousands of dollars.
A life insurance policy can help cover these types of expenses without requiring you and your loved ones to have to pay out thousands from their own pockets.
3 Expert Tips for Buying Life Insurance for Parents
Below are 3 tips to make sure you find the right type of life insurance policy and the best rates for your parents.
Tip #1: Ownership of the Policy Matters
The way life insurance typically works is that the owner of the policy and person paying the life insurance premiums is also the one being insured. So ideally, your parents would be the owners and the payers of the policy.
If You’re Parents Own & Pay for the Policy
If you’re just managing and coordinating the life insurance for your parents who will be the actual owners of the policy, then you’ll have nothing to worry about here. Move on to our next tip.
If the Child Pays for the Policy
If you’re planning on paying the life insurance premiums and taking ownership of the policy for your parents, you’ll have to prove insurable interest.This means you’ll have to state why you need this life insurance on your parents. Common reasons include:
- to pay off debt
- cover final expenses
- estate planning reasons
- if you’re still financially dependent on your parents
All of these are reasonable insurance interests, and you shouldn’t have any problem owning the policy on your parents.
Beware of the Goodman Triangle
This is important and comes into play often when buying life insurance for parents. This is something 90% of life insurance agents won’t mention because they simply don’t know about it.
The “Goodman Triangle” refers to the situation when you take ownership of your parent’s life insurance policy and have multiple beneficiaries (typically your siblings).
Since there are multiple beneficiaries, your benefits could become taxable. Let me explain with the following 2 examples where the owner of the policy is the child.
Example 1: If there’s only 1 beneficiary, the “Goodman Triangle” doesn’t come into play. Life insurance proceeds will be paid tax-free. However, if you plan to pass on death benefit proceeds to your siblings, those payments to your siblings will be subject to the gift tax.
Example 2: If your siblings are listed as a beneficiary with you, the life insurance proceeds will become taxable.
There are several ways to avoid this taxable situation if you structure the policy correctly.
Not structuring your policy correctly could cost you significant money.
Note: We’ll advise you if the Goodman Triangle comes into play, and your benefits become taxable. The best thing to do is to fill out our quote request form or call us. We’ll explain everything you need to know.
Tip #2: Don’t Buy Too Much Life Insurance for Your Parents
There has to be financial justification for the life insurance, and it has to be in line with your insurable interest.
For example: Your 74-year-old parents live off social security and a small pension. They have little debt to pay off. Trying to buy a 1 million dollar life insurance policy would raise red flags. In this case, a $100,000 policy would make more sense.
The amount of life insurance you apply for can be justified by simply stating why you chose that amount of coverage on the application. However, that’s only IF you choose an amount that goes with your reason for buying life insurance.
If you apply for too much coverage, the underwriter can respond by asking for proof through financial statements and other information. This can get VERY cumbersome. You can avoid this by purchasing a modest amount of coverage based on your family’s needs.
How Much Life Insurance Coverage Should I Buy for my Parents?
There are several different things that you should account for when deciding how much insurance to buy for your parents.
The first is any debts or final expenses that they would leave behind to you or your loved ones. Make sure that you add up all of the funeral expenses, mortgage payments, and potential hospital bills that you and your family could be left with.
Life insurance policies are designed to cover this, so it will give you a great starting point for purchasing a life insurance plan for your parents.
Another factor that you need to consider is what kind of legacy your parents want to leave to you or your loved ones. If your parents want to pass on their savings to you or your siblings, a life insurance policy is a great way to ensure that it reaches you without being picked apart by Uncle Sam.
Tip #3: Compare Multiple Life Insurance Companies
Before you entertain the idea of securing life insurance for your parents, make sure it’s affordable. There are many aspects for the carrier to calculate before they determine the final premium of the policy. Things like their age, tobacco usage, their overall health, and much more are considered to determine the rates you will pay.
The best way to find the most affordable policy is to compare multiple companies. The more companies you can compare, the more likely you are to get a cheaper rate on your monthly premiums.
The Easiest Way to Compare Company Rates
The fastest and easiest way to compare multiple companies is to enter your parents’ information into our life insurance quote engine.
We don’t require contact information to see quotes. While these are accurate rates from the life insurance companies, use these as ballpark numbers to determine if this coverage is affordable. In most cases, insurance coverage for your parents is much more affordable than you might think.
The only variable you don’t know is the health class. If your parents don’t have any health issues, use the “Preferred” health class. If there are minor health issues, use the “Regular” health class. If there are major issues, please contact us to get accurate quotes.
Different Types of Life Insurance Policies for Parents
Many people looking for life insurance for their parents aren’t sure what options they have.
Below are the recommended types of life insurance for parents.
- Term life insurance for seniors
- Burial insurance– helps cover burial costs & final expenses
- Guaranteed issue life insurance– for parents with serious health conditions
These articles below can help you navigate different ages and situations for your parents.
- Life insurance for diabetics
- Life insurance with high blood pressure
- High-risk life insurance– If your parents have a medical condition.
- Life insurance in your 60’s
- Life insurance in your 70’s
- Life insurance for seniors over 75
You can read about the top life companies here.
Be aware that many companies like AARP life insurance target seniors and parents, but may not offer the best policies. Be sure to compare and speak to an expert before deciding.
Other companies like State Farm life insurance encourage you to bundle to save; however, you actually spend more than purchasing the different insurances separately.
Note: We recommend you fill out our instant quote tool, then give us a call to compare dozens of options and find the best rate.
A Simplified Step by Step Guide
Since this is not a policy that you are purchasing for yourself, there are a few things to consider as you determine what your family members will need.
With an insurance policy, you are protecting yourself and loved ones from experiencing significant financial burdens in the event of their passing.
All of the final expenses and unforeseen bills can definitely impact you financially.
Determine the Coverage Amount
The average cost of a funeral continues to rise year after year, and this number also depends on the kind of service and features you choose. You have to keep in mind any additional costs there may be for the funeral as well including the transportation of the remains, the viewing service at the funeral home, the tombstone expense, as well as the burial or cremation expenses.
You want to take these costs and add them to the other final expenses you and your family may be faced with including any unpaid medical bills there may be, and all of this will help provide you with a clear idea about how much coverage you may need for your parents.
Finding a Policy to Fit Their Needs
With so many different types of life insurance policies to choose from, you need to take a close look and fully understand each. Find out exactly what each policy is offering and what specifically is covered under that policy. While the premiums may be less month to month, it might not end up being the policy that is best for your parents and their unique situation.
Who Is Paying for the Policy?
Now, as we have already touched on above, you need to decide who is paying for the policy. To get insurance for your parents, you may require their consent, and this often includes obtaining their signature on the insurance application. Deciding who is paying is one of the necessary steps in the process.
The Best Way to Apply for Life Insurance for Parents
Life insurance for parents requires an agent experienced in life insurance. There’s a lot more that goes into it than the typical life insurance application than we can cover.
There are several advantages to using an independent life insurance agent, like ours at Rootfin.
- Our agents have decades of experience working with applicants looking to purchase insurance for their parents.
- We have worked with just about every situation and life insurance applicant scenario that you can think of.
- It will save you time and money on your insurance hunt.
- We compare dozens of different insurance companies for you that you can choose from. You could spend weeks calling different companies to receive generic quotes about their insurance plans. The other option is letting us bring all of the best rates directly to you.
Your circumstances and history will be viewed differently from carrier to carrier, which could mean drastically different premiums, or it could even mean the difference between getting coverage or being denied. Because we’ve worked with similar applicants, our advisors will let you know which companies to get you the best outcome.
At Rootfin, we help people purchase life insurance for their parents regularly, and we can help you too. Fill out our quote tool, then contact us to find the best life insurance rates for your parents today.