The unexpected passing of a parent can be devastating, and that’s before you even consider the financial ramifications. If you’re uncertain whether or not your parents can take care of their debts and or medical expenses as they get older, getting life insurance for them is the smart thing to do.
Life insurance can help if you’re looking for protection for your family if someone passes, and it’s a reliable long-term investment. Life insurance can help you grow your estate while providing financial protection, However, it can be tricky to picking out the right policy. No need to worry, I am here to guide you through the the process.
Am I able to buy life insurance for my parents?
Can a child really purchase a life insurance policy for their parents, and the answer is yes. Buying a life insurance policy for your parents is like buying a policy for yourself — with some fundamental differences. You don’t even need to be a blood relative to purchase a life insurance policy for someone else. What you need, however, is what we call insurable interest.
What is insurable interest?
Insurable interest is validation that you stand to endure some form of financial loss if your parents die. This requirement hinders people from benefitting from policies they take out on people they expect to pass soon. Whether you’ll be paying for burial expenses or taking on your their debt family members typically shouldn’t have any problems proving an insurable interest.
Once you’ve confirmed your insurable interest, you’ll need to determine a fitting amount of coverage. Too much coverage could raise some flags with an insurance company, whereas too little could leave you scrambling to fulfill your new financial commitments. This is why it’s imperative to figure out how much insurable interest you would have if your parents were to pass away.
How to purchase a life insurance policy for your parents
Purchasing a life insurance policy for your parents is just like purchasing coverage for yourself. There are a few steps to consider to determine the right provider based on your situation:
Consent. Before looking into life insurance policies for your parents, you should ALWAYS make sure they agree. If they do not consent, you CANNOT move forward with the policy. This prevents policies being taken out on people without their knowledge.
Insurable interest. Once you have approval, you’ll need to institute insurable interest to prove that you stand to experience financial loss when they die.
Amount. Determine how much coverage you’ll need depending on you and your parents’ financial position.
Type. There are three main types of life insurance: universal, term, and whole. Discuss the type of policy best for your situation with your agent, to ensure you have the protection needed.
Ownership and beneficiary. If you’re looking for life insurance for your parents, you may also be the beneficiary and owner of the policy. This is not always the case. Determine who is in charge of the policy and listed as a beneficiary.
Payer. Typically the owner of the policy is in charge of paying the premiums, but your situation may be different. Speak with your parents and your agent to determine who’ll make payments on the policy.