No one likes to think about that moment when their parents’ lives will come to an end.
It is an unfortunate reality that we will lose our parents one day, but one we must face. And something we need to prepare for.
Part of final arrangements may need to include life insurance for your parents, where you name yourself as the beneficiary. At the very least, this will ensure any burial and final expenses will be covered.
Buying life insurance for parents does not need to be difficult.
We’ll lay out exactly what you need to know to qualify your parents for an affordable life insurance policy.
You Must Demonstrate “Insurable Interest.”
The key to getting your parents approved for a life insurance policy is establishing what life insurance companies call “insurable interest.”
This means you are able to demonstrate that you would incur a financial loss upon the death of your parents. This is easy enough to do since children are often responsible for funeral expenses, certain debts, and estate taxes.
Next, you’ll need to decide on which type of life insurance you want for your parents, permanent or term.
Term vs Permanent Life Insurance
As you might already know, permanent life insurance is more expensive since it provides coverage for the remainder of the insured’s life.
Term on the other hand only provides coverage for a specific period of time.
It will be up to you to decide which coverage type suits your needs the best. Age of your parents is also an important factor to consider.
If your parents are advanced in age, it may be wise to purchase a term life insurance policy for a time frame that exceeds their life expectancy.
Watch Out for the Goodman Triangle When Buying Life Insurance for Parents
Not to be confused with the Bermuda Triangle, the “Goodman Triangle” is a real concern and something you should ask a knowledgeable agent about before purchasing a policy.
When just one child is listed as the beneficiary on a parent’s life insurance policy, he will receive the payout upon parent death tax-free.
BUT….when you own your parent’s life insurance policy and they have multiple beneficiaries listed (such as you and your siblings), each of you will have to pay taxes on your payout.
As you can imagine, this can cost you a BUNCH of money!
Now, there are legitimate ways to get around this, but this is something you would be best off talking about with an experienced life insurance agent.
Only Buy the Coverage That You Need
Part of the “insurable interest” concept is only buying how much life insurance you need to cover expenses.
If you only demonstrate $50,000 worth of expenses as a result of your parent’s death, but then go and apply for a $1,000,000 life insurance policy, that’s going to raise more than a few eyebrows.
So be aware of your parent’s final expenses and only apply for the coverage you need to pay for those expenses.
Will the Premiums be Expensive?
How much your premiums cost will depend on a variety of factors. Age, of course, will play a role.
If your parents are 85, you can expect their premiums to be more expensive than if they were only 60 years old.
The presence of certain medical conditions will affect your premiums too. If your parents have heart disease, diabetes, high blood pressure, or history of cancer, you can expect higher premiums.
Generally speaking, the healthier your parents are, the lower your life insurance premiums.
Sample life insurance rates pulled from our quote engine
An 80-year-old non-smoking male at standard health class can receive $50,000 in coverage for
- $367 per month on a 10-year term with Genworth Financial
- $407 per month on a 10-year term with Transamerica
A 73-year-old non-smoking male at standard class can receive $25,000 in coverage for
- $140 per month on a 10-year term with Genworth Financial
- $177 per month on a 10-year term with Transmerica
A 75-year-old non-smoking female at standard health class can receive $25,000 in coverage for
- $144 per month on a 15-year term with Genworth Financial
- $109 per month on a 10-year term with Genworth Financial
A 80 year non-smoking female at standard health class can receive $50,000 in coverage for
- $254 per month on a 10-year term with Genworth Financial
- $308 per month on a 10-year term with Transamerica
At the moment, Genworth and Transamerica offer the best rates for these types of policies but it’s especially important with seniors to have your specific health histories shopped to the various underwriters in order to secure the best rates which may be with a different carrier.
Have Your Parents’ Health Records Ready
When you are filling out life insurance applications for your parents, you will need to know details of their health history, including medications.
It is best to be prepared and have this information readily available to you ahead of time.
Unless you are the primary caregiver for your parents and intimately familiar with their health conditions, it might be a good idea to have your parents obtain an extra copy of their medical record for you to use if necessary when filling out their applications.
You want to be sure the information you are providing about your parents’ health is accurate.
Otherwise, you may run the risk of getting hit with a higher premium down the road if the insurer finds out some of the health information was not correct.
Shop Around and Consider Talking to a Trusted Professional
Planning ahead for your parents’ final expenses can be stressful and emotionally draining.
Fortunately, buying life insurance for parents doesn’t have to be this way. Our goal is to make this process easy and pain-free.
Simplicity is first and foremost, but it still is in your best interest to do your due diligence.
This means taking the time to get multiple life insurance quotes from at least several reputable companies.
Always remember that premiums can vary widely between companies.
That’s why it’s SO important that you understand how the different carriers might view your personal situation. Shopping around will result in you getting the best life insurance coverage for your needs at an affordable premium.
Please keep in mind that underwriting guidelines can and DO vary greatly between carriers and this is often a complicated maze for consumers to navigate.
The secret to getting the lowest rate is placing your parents in a policy with the company who views them in the most favorable light.
The truth is the quote engine is a great place to start. But if you are shopping for life insurance for your parents, your best bet is to work with someone who understands the complicated guidelines and will fight on your behalf to get the lowest rate for your situation.
We are one of the rare independent brokers that only sells life insurance so we’ve gotten pretty darn good at it.
If you are ready to get started, please fill out a quote request or always feel free to contact us with any questions.
We are here to help and will never pressure you in any way.
And if there will be multiple beneficiaries for your parents’ life insurance policy, don’t forget to ask about the Goodman Triangle.