Table of Contents
- Can you buy life insurance for your parents (or someone else)?
- The best life insurance types for parents
- No Medical Exam Term Life Insurance
- Final Expense Life Insurance
- Guaranteed Issue Life Insurance
- Accidental Death Insurance
- Insurable Interest
- How Much Would Life Insurance Cost?
- Reasons to Buy Life Insurance for Your Parents
- Choosing a Coverage Amount
- Choosing the Best Type of Life Insurance Policy for Your Parents
- Rating Factors for Life Insurance Policies
- Sooner is Often Better for Rates
- Key Takeaways
Can you buy life insurance for your parents (or someone else)?
Yes, it is possible to buy life insurance for your parents, or someone else, but you must have:
- their consent (typically their signature on the application)
- proof of “insurable interest” (that their death would have a financial impact on you)
While both may be fairly easy to acquire, depending on your personal situation, it may be easier to have your parent apply for life insurance instead.
Of course, that doesn’t mean you can’t do the majority of the heavy lifting, like comparing rates or even applying for your parent, and having them finalize the application.
The best life insurance types for parents
Which life insurance type is best for your parents depends on a few factors, such as the age and health history of your parents, as well as how much coverage is desired.
Below you will find the top 3 life insurance types for parents. It’s easy to see how much a life insurance policy would cost. Simply click “Get a Quote” to compare rates of dozens of top rated life insurance companies at once.
No Medical Exam Term Life Insurance
- No medical exam
- Very affordable
- $10,000 – $1,000,000
Our professional advice:
No medical exam term life insurance is our recommended solution for people younger than 65, in average or better health. It offers the highest coverage amounts, with no medical examination. In comparison to guaranteed issue or final expense, it’s also 2-5 times more affordable!
Final Expense Life Insurance
- No medical exam
- $2,000 – $100,000
Our professional advice:
Final expense life insurance is our recommended option for individuals ages 65-85. It’s more affordable than guaranteed issue, and the health qualification is simple. There is no medical examination involved.
Guaranteed Issue Life Insurance
- Can not be denied
- Quick issue
- $2,500 – $40,000
Our professional advice:
If you had some serious health conditions, a guaranteed issue life insurance policy may be your only option. You can not be denied due to health conditions or age. It can provide enough coverage for funeral expenses and a bit extra. But, it’s more expensive than any other life insurance type.
Accidental Death Insurance
- Can not be denied
- Most affordable
- $50,000 – $500,000
Our professional advice:
If you’re looking for coverage, but your budget doesn’t allow a traditional policy, this is it. Basically, anyone can qualify for an accidental death life insurance policy, regardless of their health history. It’s also more affordable than any kind of traditional life insurance type. However, this type of insurance only pays if the cause of death is due to an accident.
Having the conversation about life insurance for your parents opens a dialogue about other important considerations related to seniors such as long-term care, wills, executors, and overall finances.
Life insurance is an integral part of life planning and the life insurance conversation helps families take an honest look at their true needs and the detailed numbers on everything from retirement savings to health care to final expenses.
Whether buying life insurance for your parents or for anyone else, you’ll need the consent of the insured.
Purchasing life insurance for your parents can be done in one of two ways.
Your parents can buy their own life insurance policy. If your parents purchase their own life insurance policy, there is no need for them to prove insurable interest because they are the owners of the policy as well as the insured. If they choose to name you as a beneficiary, which is the person to whom the death benefit will be paid, the payout can be used for final expenses or any other remaining expenses or debt.
Alternatively, you can buy a life insurance policy for your parents, but only if you can prove insurable interest and only with their consent. Like many other activities we all experienced while growing up, you’ll need your parents’ permission to buy a life insurance policy for your parents. In this case, you are the owner of the policy and responsible to make premium payments.
To buy life insurance for someone else, you need to have an insurable interest. The term insurable interest in this context just means if your want to buy life insurance for your parents, you have to demonstrate that the death of your parent or parents would cause a financial loss for you. The insurable interest requirement isn’t unique to life insurance. For example, you also can’t insure your neighbor’s house. You wouldn’t suffer a financial loss if your neighbor’s house was damaged.
It often isn’t difficult to prove you have an insurable interest if your parents pass but the amount of documentation needed will increase as the requested policy coverage amount increases. A smaller policy with up to a $50,000 death benefit will require less proof of insurable interest than a policy with a death benefit of $250,000. A smaller policy generally considers final expenses, such as funerals and burial costs, which can often exceed $10,000. Policies with higher coverage amounts may be considering sizable outstanding debt as well, such as a mortgage on a home or other debt which could affect an inheritance or possibly turn an inheritance into a sudden burden.
As a part of insurable interest, the amount of the death benefit must closely match the amount of the financial loss you would suffer if your parents passed. If your potential loss is only $25,000, you may not be able to purchase a larger policy of, for example, $250,000.
How Much Would Life Insurance Cost?
Rates listed below are for a 64 year old man in California in good health and who never smoked.
|Premium Quoted||Amount Of Coverage||Policy Type|
|No Exam Term||$63 per month||$50,000||10 Year Term|
|Instant Issue Term||$78 per month||$50,000||10 Year Term|
|Final Expense||$129 per month||$25,000||Whole Life|
|Guaranteed Issue||$201 per month||$25,000||Whole Life|
Reasons to Buy Life Insurance for Your Parents
There may be any of a number of reasons to buy life insurance for your parents. Think carefully about the goals of the life insurance policy you’re considering. Your objectives with the policy can help determine appropriate coverage amounts and help you to choose a policy type that best meets your objectives.
If your goal is to have the policy pay for final expenses, a policy with a death benefit between $10,000 and $50,000 may meet your needs. Bear in mind that final expenses may include some medical expenses and that funeral and burial costs have a tendency to outgrow budgets and cost expectations. Among common medical costs are hospice and hospital bills that were not covered by Medicare. It’s wise to plan for at least some leftover bills when setting goals for a life insurance policy for your parents.
If your goal with the life insurance policy goes beyond final expenses, another type of life insurance policy may better meet your needs. For instance, if your parents own a house which they intend to leave to you but the home still has a sizable mortgage, a life insurance policy with a higher death benefit may help to pay for final expenses as well as paying some or all of the remaining mortgage balance on your parent’s home. You may not know with certainty that you’ll have the extra money to take on a mortgage, or a second mortgage if you already have a mortgage for your own home. Without a life insurance policy or a mortgage life insurance policy for your parents, there is a risk that the home they leave to you as an inheritance can be lost or forced into a sale during an already difficult time.
Choosing a Coverage Amount
Once you’ve established your goals for the life insurance policy for your parents, it’s time to do the math and start estimating how much you will need the policy to provide as a death benefit.
Every family’s situation will be different, but common to all will be final expenses. Funerals and burials can easily top $10,000 per person. It’s better to budget higher than this, if at all possible because lingering medical bills or hospice bills can cause final expenses to grow significantly. If a higher coverage amount doesn’t fit your budget, a burial life insurance policy with a death benefit as low as $10,000 can be purchased. A policy with a lower death benefit can offer more affordable monthly premiums, but may leave you with considerable expenses after the proceeds from the death benefit have been used.
If your goal for the life insurance policy is to protect an inheritance, maybe a home that your parents are leaving to you, you’ll need to look at larger death benefit options, which may reduce the types of policies that will meet your needs.
It becomes important to look a the big picture including the amount of money your parents have in savings, other income, and outstanding debt. If your parents have significant savings and only a short amount of time remaining on their mortgage, you may not need as much for a death benefit. However, if your parents just did a cash-out refinance on their home and have no meaningful savings, you might want to look closely at those numbers. When parents pass before the mortgage is paid off, their heirs could inherit a sizeable mortgage payment.
Choosing the Best Type of Life Insurance Policy for Your Parents
Having a policy is often better than having none at all, but not every life insurance policy will meet your needs as well as others and some types of policies might not fit well for your individual situation.
Common Types of Life Insurance:
Term Life Insurance
Term life insurance is life insurance with a time limit. It isn’t designed to last forever. Most often, term life insurance is purchased to cover a large debt, such as a mortgage or another financial obligation. Depending on the age of your parents, term life may not be the best choice. Term life insurance has a set time frame, a term, which may be 10 years to 30 years. This type of policy is often purchased to cover a financial responsibility that has an end date, like a mortgage or providing for children.
Because a term life policy is only in force for a specific amount of time it is less expensive than some other life insurance types. However, term life insurance has some limitations when buying life insurance for your parents. The available term options, meaning how long the policy will be in force with guaranteed premiums, will often be for a shorter amount of time if the insured person is older. Someone who is 65 years old may find that some life insurance companies will only offer a 10 year term policy.
If one of your primary reasons to buy life insurance for your parents is to cover their mortgage and the time remaining on their mortgage is within the available term options, ask an agent if a term policy is a good fit for your needs. An agent can explain the details as they relate to your individual situation.
Whole Life Insurance
Whole life insurance is designed to be a life insurance solution that lasts for, as its name suggests, the entire life of the insured. Where a term policy has a fixed time period for guaranteed premiums, a standard whole life insurance policy offers fixed premiums for the entire life of the insured. Premiums for whole life insurance policies are more expensive for the same amount of coverage when compared to a term life policy because a term life policy might not ever pay a death benefit but a whole life insurance policy always pays a death benefit for qualified claims.
Final Expense Insurance
A final expense life insurance policy is a type of whole life policy that is designed to pay for final expenses. Its focus on this one goal creates some unique characteristics. A final expense policy is often only available for people over the age of 50. Many companies offer policies for customers up to 80 years of age, and sometimes even slightly older. Expect rates to be higher as the age of the applicant increases.
Often, a final expense policy will have a simplified application and may not require a medical exam, so the main driver for rates is the age of the applicant. Even if a medical exam is not required, applicants will need to answer some questions about their health, and insurance companies may check the information available from the Medical Insurance Bureau (MIB).
Death benefit options for final expense policies are usually on the lower end because this simplified policy type is intended for final expenses.
Universal Life Insurance
Universal Life Insurance and its variations add an investment element to the life insurance policy and add some flexibility to the policy premiums if the cash value from investments is sufficient. As with many investments or investment-based products, time is an important element for returns. If your parents are older, ask an agent if a universal life insurance policy will meet your goals or if another type of life insurance policy would be a better fit.
Group Life Insurance
Group life insurance is available to people of all ages, and there are few health questions, if any, that must be answered in order to qualify. Term and whole life policies may be available, depending on the group. Entities such as organizations, trade groups, and associations offer group life insurance to their members. Membership to a group or association is required.
Rating Factors for Life Insurance Policies
The age of your parents will be a large factor in determining rates. Health, family history, hobbies, and other factors may be considered. Rating factors and how heavily each is weighed may also vary by company. Some insurance policy types may require a medical exam.
Some Common Life Insurance Rating Factors:
- Age of applicant
- Height and weight
- Health history
- Marital status
- Tobacco or nicotine usage
- Alcohol usage
- Drug usage
These and other rating factors are used by insurers to determine the risk of death and to set premiums based on that risk. For many policy types, insurers will assign a rating class that groups people by health status, family history, and other factors.
A final expense life insurance policy simplifies the process of the application and may not require a medical exam. However, without an exam, which helps insurers to understand the risk and to set appropriate premiums, rates may be higher with a final expense policy (or any other no-exam policy).
The amount of the death benefit will also drive rates, but not usually on a linear basis. A policy with a $50,000 death benefit usually doesn’t cost twice as much as the same policy with a $25,000 death benefit.
Sooner is Often Better for Rates
Life insurance rates are based on many factors, but the primary driver for the premiums is based on the probability that the insured will die while the policy is in force. Along with health factors, age is among the largest factor in determining life insurance rates. People can die from a lot of different causes but if none of the other causes gets us, age always will. We aren’t built to last forever.
A life insurance policy purchased earlier in life will generally be much less expensive than a policy purchased in the later years of life. There’s less risk of death when we are younger. The risk of age also carries over to policy types. As we get older, or as your parents get older, you’ll find your options for policy types will begin to dwindle with many insurers. For example, term life insurance may not be available after a certain age with some insurers. Even at earlier ages, you may find the available term choices to be limited to shorter terms.
Buying life insurance for your parents (or anyone else) requires their consent and evidence of insurable interest equal to the amount of the death benefit.
There are two ways to buy life insurance for your parents. If your parents purchase the policy, they do not need to prove insurable interest because they will be the owners of the policy and the insured. If you purchase the life insurance policy for your parents, you will be the owner of the policy and responsible for payments. In this case, you will need the consent of the insured and demonstrable insurable interest.
Choosing the right type of life insurance policy for your parents and choosing a death benefit amount that will meet your needs requires taking an honest look at the goals of the policy. In some cases, it’s best to have a thorough conversation with your parents regarding their long term care, overall finances, outstanding debt, and other considerations.
Life insurance is part of an overall life plan. An agent can guide you through the process and explain your options so you can rest easy – knowing you and your parents are well-covered.
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