The term “life insurance for parents” can sound a little confusing at first. Is it life insurance made for people who have kids? Actually, life insurance for parents entails buying a life insurance policy for your parents. Below we’ll look at what this all entails, when it makes sense to do this and other factors like pros and cons.
- What is Life Insurance for Parents and Why Get It?
- How to Get Life Insurance for Parents
- Pros of Getting Life Insurance for Parents
- Cons of Getting Life Insurance for Parents
What is Life Insurance for Parents and Why Get It?
In certain cases, it makes sense to purchase life insurance for your parents. Common situations where this is true include:
- Your parents are aging, and because their finances are not in good shape, they may need financial help from their children.
- A parent could become ill, requiring care from a child. This could incur care costs and even lost wages if the child has to take time off of work.
- Situations where the child can’t inherit family property could lead to financial loss, such as if a parent still had a mortgage on a property and then passed away.
- Certain policies may have living benefits that allow you to pull money out of the policy if your parent becomes terminally ill or disabled.
All of these are situations that place a significant financial burden on a child. Getting life insurance for your parents can ease that burden in a couple of ways. The most direct way is that the death benefit then goes to the children upon the parent’s passing. Some plans also have a cash value component that can build wealth and act like a savings or investment plan.
Another situation where it makes sense to get life insurance for parents is looking for final expense life insurance. These policies tend to cover necessities like burial costs. If you don’t want to be saddled with the afterlife costs when a parent dies, this can be a solid option to protect your finances, since average funerals can cost between $7,000 and $10,000.
How to Get Life Insurance for Parents
A couple of conditions you will need to meet in order to purchase life insurance for your parents.
- You have to have your parents’ consent, which is usually proven by a signature on an application.
- To find life insurance for parents, you also need to prove “insurable interest,” which means that a parent’s death would impact you financially. Often, the coverage amount must match how much you stand to lose. For instance, a child could have co-signed on a mortgage with a parent and the outstanding amount is still $100,000 when the parent dies. That’s how much coverage the child would most likely qualify for if that’s primarily where they stand to lose money.
- Sometimes people also have the parent apply for the insurance themselves, while helping that parent compare prices or helping with the application.
A key component is also deciding which type of life insurance to buy. Your main choices, in addition to final expense insurance listed above, are term life insurance, whole life insurance, or universal life insurance.
Pros of Getting Life Insurance for Parents:
- Ease of financial burden when parents pass away
- Creates a safety net if your parents get sick
- Can help cover expenses if your parents’ finances are in a weak place
Cons of Getting Life Insurance for Parents:
- Since you buy the policy, you are responsible for making premium payments
- This isn’t something you do to get rich: you must prove that the life insurance policy makes up for financial loss of your part, so it’s more of a break-even solution
Whether you get a life insurance policy for your parents depends on if you want to take on the burden of added monthly premiums to have a financial safety net down the line.
Final Thoughts
You can actually buy life insurance for parents. This can offset end of life fees or other financial burdens like if a parent still has a mortgage on a home. There are many different types of life insurance, and you have to decide if the monthly premiums outweigh the financial risks that surround a parent getting sick or passing away.