Can I Get Life Insurance on My Parents?
Many adult children wonder if they can get life insurance on their aging parents. There are a few reasons why someone may want to do this:
- To pay for funeral and final expenses when the parent passes away
- To replace potential lost income if the parent was providing financial support
- For peace of mind knowing funds will be available for care
Getting life insurance on your parents as an adult child is possible, but there are some important factors to consider. This guide will explain how it works, the pros and cons, and alternatives to explore.
Requirements for Getting Parent Life Insurance
In order to get life insurance on your parents as an adult child, there are a few requirements:
The Parent Must Consent
– Life insurance cannot be taken out without the parent’s knowledge and consent. The parent will need to sign the life insurance application and go through medical underwriting.
The Adult Child Must Have an Insurable Interest
- Insurable interest means the adult child stands to suffer financially from the parent’s death. This is easy to demonstrate if the parent provides income or caregiving support.
The Policy Must Be Paid for By the Adult Child
- The adult child seeking insurance on the parent needs to pay the premiums. The parent cannot pay for a policy naming the adult child as beneficiary.
The Adult Child Must Be The Beneficiary
- Life insurance policies require naming a specific beneficiary, which would need to be the adult child in this situation.
As long as these requirements are met, an adult child can pursue life insurance on aging parents in most cases.
The Pros of Getting Parent Life Insurance
There are some potential benefits that come with getting life insurance on your parents:
Lock In Insurability Before Health Declines
- Older parents may develop health conditions that make them uninsurable. Getting coverage earlier means you aren’t scrambling when the parent’s health changes.
Avoid Tough Medical Underwriting Down the Road
- Insurers will ask more health questions as parents age. Locking in coverage earlier results in easier underwriting.
Provide Funds for Final Expenses
- Life insurance can pay for burial costs, outstanding medical bills, and other end-of-life expenses so adult children don’t have to cover them.
Replace Lost Income
- If parents provide financial support that would end at their death, life insurance funds can help replace that income.
Peace of Mind
- Just knowing that insurance funds will be available can provide comfort to both parents and adult children.
The Cons of Getting Parent Life Insurance
There are also some drawbacks to consider when insuring parents later in life:
Premiums Can Be Expensive
- Policy costs increase significantly as people age. Premiums for parent policies may be prohibitive.
Underwriting Is More Difficult
- Older applicants go through much more scrutiny and health screening. There’s a greater chance of being denied.
Coverage May Be Declined or Limited
- Insurers are cautious about insuring older adults. They may limit policy amounts or types available.
Ethical Concerns About Benefiting from Parent’s Death
- Some adult children are uncomfortable with the idea of gaining financially when a parent dies.
Parents May Be Unwilling or Unable to Get Insured
- If parents don’t consent or can’t qualify medically, children cannot obtain policies on them.
For these reasons, getting life insurance on aging parents can be difficult or impossible in some cases. The challenges need to be considered before pursuing this option.
Alternatives to Buying Life Insurance on Parents
If getting parent life insurance doesn’t seem feasible or appealing, here are a few alternatives to consider instead:
Have Parents Get Policies Naming You as Beneficiary
- This avoids underwriting challenges since policies are purchased when parents are younger.
Explore Long-Term Care Insurance
- This can pay for medical and custodial care costs if parents become ill or disabled later in life.
Discuss Having Joint Accounts or Being Named on Bank Accounts
- This allows accessing funds to pay final costs if you are a joint account holder.
Ask Parents to Set Up a Payable on Death Account
- POD accounts pass to the named beneficiary upon the parent’s death without probate.
Help Parents Apply for Final Expense or Burial Insurance
- Smaller policies meant to cover final costs are usually easier for older applicants to obtain.
Plan Alternate Methods to Cover Final Costs
- Setup a savings account or make other contingency plans to cover final expenses when needed.
Key Factors in Getting Parent Life Insurance
If you’ve weighed the pros and cons and still want to apply for life insurance on a parent, be prepared by learning more about the process. Some key factors include:
Choosing the Type of Policy
- Term or permanent insurance are options. Term may make more sense for older applicants due to lower cost.
Selecting the Amount of Coverage
- Consider potential lost income, outstanding debts, and final costs. Funeral expenses average $7,000-$10,000.
Researching Insurers Specializing in Older Ages
- Some companies are more adept at getting coverage approved for older applicants.
Having Parents Get Checkups Before Applying
- -Having up-to-date health records can help facilitate the underwriting process.
Being Prepared to Pay Higher Premiums
- Annual costs will likely be much higher than when applying for coverage at younger ages.
Checking into Guaranteed Policy Options
- No exam or simplified issue policies can provide guaranteed coverage but for smaller amounts.
Working with a trusted insurance agent or broker can also help navigate the process and improve chances for approval.
Answering Common Questions About Parent Life Insurance
There are a number of common questions that come up when considering life insurance for older parents:
What Ages Can Be Insured?
Most insurers will underwrite applicants up to at least age 80, with some going up to 85 or beyond. Health history becomes increasingly important the older the applicant is.
How Much Coverage Is Usually Available?
Policies of $25,000 up to $100,000 or more may be possible, depending on the insurer and health status of the applicant. Overall good health will allow higher amounts.
What Medical Conditions Could Prevent Approval?
Major conditions like heart disease, cancer, diabetes, respiratory disease, and neurological disorders can make underwriting difficult or result in denial. Milder conditions may still be insurable.
How Long Does the Application Process Take?
Expect the underwriting process to take 2-6 weeks. It can sometimes stretch longer for older applicants with health issues to investigate. Applying with an insurer that has a streamlined underwriting process for seniors can help speed things along.
What Information Will Parents Have to Provide?
Insurers will collect medical records, a recent physical, and information on prescription drugs. Lab work, a medical exam, and physician statements may be required depending on the applicant’s age and health.
FAQs About Getting Life Insurance on Parents
Can I purchase a life insurance policy on my parents without their consent?
No, it is illegal to take out a life insurance policy on someone else without their knowledge and consent. The application and underwriting process will require participation and signatures from your parent.
What if my parents aren’t in good health?
It can be more difficult but usually not impossible to get life insurance approved if your parents have existing health conditions. Being prepared with their medical records and applying with a company experienced in higher-risk cases improves the odds.
How soon can I collect the life insurance money after my parent passes away?
Payout from a life insurance policy is typically within just a few weeks after submitting a death claim to the insurer. This makes the funds readily available when needed.
Are there tax implications with life insurance policy payouts?
Generally, life insurance benefits are not subject to income tax, making them a tax-favored way to receive funds. There are exceptions like policies that have accumulated cash value, so check with your tax advisor.
What alternatives are there if I can’t qualify to get life insurance on my parents?
Options like final expense policies, having parents buy policies listing you as beneficiary, or setting up payable-on-death accounts provide ways to receive funds without purchasing policies yourself.
Getting life insurance on aging parents can provide peace of mind and financial protection for both adult children and their parents. There are valid reasons on both sides for considering this option. Doing thorough research, understanding all the implications, and evaluating alternatives allows making the most informed choice. Having open and caring conversations with parents is key to finding the best solution for everyone. With proper planning, you can make sure funds are there when needed at a difficult time, allowing you to simply focus on honoring your parent’s life.