So you are considering a life insurance policy to cover the final expenses of Mom or Dad? If so, you came to the right place to get those answers. Buying life insurance for your parents is a great and affordable solution. Leaving this world can create a lot of stress for the whole family. Life insurance can bring peace of mind knowing that those costs will be taken care of.
Can You Buy Life Insurance on Your Parents?
A question frequently asked by people with elderly parents and needing life insurance is if it is possible to actually purchase a policy on one or both parents.
However, your parent(s) must consent to the coverage and be legally competent for you to take coverage out on them.
If they have Alzheimer’s or Dementia, they are not going to be able to legally consent and Power of Attorney will not change the insurability.
It is quite common for people with aging parents to take out a policy to ensure that they are not devastated financially by the loss of a parent. Leaving this world is costly to say the least which makes buying the right policy, very important.
Can I buy life insurance on my parents without them knowing?
An insurance company will not take an application for any life insurance without parental acceptance of the coverage and provide legal consent at the same time.
Premium Tips To Consider When Buying Life Insurance For Your Parents
Do you think you need life insurance on your parents? While not all families need final expense coverage at this point of life, more than a few really do. Life insurance, if bought carefully can make a lot of financial sense. It is optimal to take action sooner than later as the cost of coverage goes up quickly as your parents age. Additionally, risks such as a deterioration in health can hamper the ability to get the most reasonable rates.
Before you can actually purchase life insurance on them, your parent(s) must consent to the coverage. This is for their own protection.
Not all families have loving relationships, sadly.
Now, if your not sure if you need to take out the coverage on your parents, you might want to review this article from Forbes. This is written by an experienced financial planner. Items #2, 3, 5 and 6 might be of some help if you are trying to figure it all out.
At this point, let’s jump into the tips we would suggest you keep in mind. These tips will guide you to the best value for your money and create the financial support to cover the loss of a parent.
Tip #1 Buy The Right Kind of Life Insurance for Parents That Meets The End Goal
Life insurance is actually a pretty vague term. There are a lot of different kids of policies that are marketed out there. One size does not fit all especially with seniors where necessary financial planning is for the end of life, not the what ifs.
Because of this, buying a life insurance policy for your parents will dictate a different policy than a young married couple age 30 with 2 young kids.
So where does that leave us?
Well, it means to dispose of term life insurance in most cases. For seniors in their 80’s, it cannot even be purchased. It typically expires at age 80. Many elderly parents live well beyond that. Modern medicine has extended life.
Tip #2 Use Old Dependable – Permanent Whole Life Insurance
Permanent Whole Life insurance is designed to last for the insureds lifetime. The cost will never go up and the death benefit will never go down. This coverage is required when financial protection is needed for an unknown period of time or when a parent cannot qualify due to health reasons for alternate coverage. The most common reason seniors will need a whole life insurance policy is for:
- End of Life Expenditures: Funeral, Outstanding Medical Bills, Debt
- Small Family Legacy or Donation to a Charitable Cause
Whole Life is the “Old Dependable” when it comes to final expenses. As long as the premiums are paid, the policy will never expire and pass on tax free money to the family.
If there is a drawback to whole life insurance it is that it is the most expensive type of life insurance per thousand dollars of coverage and you are paying for a living benefit, cash accumulation inside of the policy.
For a senior and a new policy, this living benefit is not much use. The cash value is not distributed at death either. The policy death benefit is.
We do not recommend taking loans from the cash value on final expense policies.
Whole life policies for parents are still very affordable because they are offered in small amounts.
I will mention term life insurance just briefly in this article.
It has it has a very limited place in senior planning as a general rule.
Term life insurance has gotten a ridiculous amount of attention over recent years.
What most people don’t realize is that a lot of seniors have had that term coverage expire on them and go gangbusters in price.
The other scenario is the cost of term coverage increases every 5 years until it is unaffordable or expires at age 80.
If buying coverage your parents need has a defined period of time, then and only then does term life insurance supplant whole life insurance. Examples such as a mortgage, car loan etc. You should only purchase term insurance when your needs are temporary. You can go to our instant life insurance quote page if you want a term life insurance quote. Just ignore the directions at the bottom in that case. The right hand widget will give you the numbers you want from all the top carriers.
The next option offers the benefits of whole life insurance and term insurance.
Tip #3 Guaranteed Universal Life Insurance (GUL) Option
This is another form of permanent life insurance. It can be purchased with expiration dates of up to even age 121.
Now, this policy resembles term life insurance in cost comparison, but provides coverage that can outlast anyone’s life span I have heard of.
The key point with Guaranteed Universal life policies is that they are generally larger policies of $50,000 or more. Per thousand, they are much lower in price than senior whole life coverage and have “term like” cost.
GUL has no cash value accumulation like whole life insurance typically. Whole life accumulates cash inside as a built in, living benefit.
Cash accumulation is not a free benefit though.
With that said, do your parents need a larger policy to reach the goal? If so, Guaranteed Universal life insurance is lower in cost and offers a guaranteed, no lapse in coverage, fixed target premium and guaranteed death benefit available to age 121. These policies are best for:
- Estate Planning
- Charitable Giving
- Legacy Creation
- Final Expenses
If you want to see how much of a difference there is between the two types of life insurance, go to our instant quoting page and follow the directions at the bottom to run the comparison.
Tip #4 Legally Avoid Paying Income Tax On Policy Death Benefits
With a life insurance policy, there really are 3 named parties recorded in a life insurance contract regardless of what kind it is. This is in addition to the life insurance company itself.
- The Insured
- The Policy Owner
- The Policy Beneficiary
The key to avoiding a taxable incident is making sure that 2 of the 3 above are the same person.
If you set three different people up to fill the parties of the policy contract then the death benefit can be considered a taxable event by the IRS.
Further, if the payout become a taxable event, the policy owner could be saddled with the tax bill not the beneficiary. This will depend upon the size of the death benefit paid out.
Just remember, if you are buying a life insurance policy on one or both of your parents, be sure you are both the owner and the beneficiary of the policy. That scenario fills 2 or the 3 above negating taxable issues with the IRS.
So when does a policy become taxable if all of the 3 above are different parties?
As of 2018, the IRS allowed a gifting of up to $15,000 per person. With that said, you could have 3 different parties such as you, your parent and a brother as beneficiary if the policy was $15K or less without it becoming taxable.
Hope this makes sense. It is important to understand how this all works for tax purposes.
I’m sure you agree.
Make sure you are working with an independent agent/broker that knows this. Yes, this is a shameless plug for my company.
Tip #5… Work Only With An Independent Agent or Broker
It is key that you do business with a professional that writes this kind of business daily. While we have a 24 hr automated process available, it cannot educate you on the issues involved with buying life insurance on your parents.
The largest issue we run into with seniors is overall health.
One or two insurance companies is not enough to consistently and affordably insure the lives of the average senior.
Seniors all have different health histories.
While company ABC may offer coverage, it may be at a much higher cost than several other companies.
The solution to all this is the independent agent or broker who has access to an unlimited number of life insurance companies. Their hands are not tied. They shop your parents age and health to match it with the best company.
Stopping in the State Farm or Allstate office is not a good solution. What can they offer you? Poor rates and very likely decline for most seniors. These are not big life insurance companies that are focused on senior products.
AIG, Transamerica, Mutual of Omaha are big name life insurance carriers for seniors. These companies are found with independent life insurance agents, not the guy or gal selling auto and homeowners insurance, captive with 1 company.
So what do you think? Do you think you’ll find a better offer with the office that sells 1 company or the independent broker who has access to all the top life insurance companies?
The Key To Remember When Buying Life Insurance On Your Parents
Having Lots of Choices Does Matter.
Regardless of your parents health situation, a good independent agent/broker will always offer the option of buying Guaranteed Acceptance life insurance coverage if they can’t qualify conventionally.
However, this should only be done as a last resort.
Do not assume your parents cannot medically qualify. Final Expense and Burial Insurance is designed specifically for senior health and ease of qualification. No exam life applications are pretty standard. All of these carriers understand the elevated risk situation they are in.
Your independent professional should be your guide to the right product and company. A seasoned independent agent will have a high degree of influence how good of a purchase experience and deal you will get.
With an independent agent, Mom and/or Dad can get quality coverage whether the had a heart attack a year ago or have diabetes among many other health ailments. It is all about having choice if you want the best coverage and lowest premiums.
Tip #6 Gather Your Parents Health History In Reasonable Detail
Since your parents health will also be major factor of which companies will be willing to offer coverage, the details will help dial in the best price.
Before you start talking to any insurance pro, have your parents health history written down so you are prepared to discuss this. This includes prescriptions they have been prescribed whether used or not. Expect questions from the agent who is trying to pinpoint issues beyond high blood pressure and cholesterol issues. This will help them field underwrite the case so you parents can be pre-qualified prior to applying.
No agent can really help you if you are not really tuned up on your parents health picture. If I were interviewing you, here is generally what I’m going to be questioning before recommending carriers:
- Currently Height and Weight
- Tobacco and/or Alcohol Consumption
- Prior Health such as stroke, heart attack, cancer and any other hospitalizations (when did any of these occur?)
- High blood pressure, COPD, CHF, any diabetes (when were these diagnosed)
- Prescriptions, both past and present including inhalers, oxygen or nitro
- Moving violations: Have they had any driving violations in the last 5 years
- High risk issues…rock climbing, sky diving etc
Do your best to know the answers but don’t worry if you can’t get all of them. It just helps us to help your get the best coverage on your parents. Usually the medication(s) will give us a start for a simple quote as it usually predicts a particular medical condition.
If you or your parents are not asked any health questions during your conversation, find someone else. That person is probably not going to do what is in the best interest of the family. Instead, look for an independent agent or broker who regularly works with seniors and understands why you are buying life insurance on your parents. In order to get the most affordable coverage and level benefit whole life insurance, health questions are part of the pre-qualification process…to zero in on the right company and policy.
Tip #7 It Is Not Necessary For You To Be Physically Present With Them For Life Insurance Application
When I was just starting out working with seniors nearly 25 years ago, I had to visit consumers physically to write up their application for life insurance. There was no way around it.
While part of me misses in-person part of connecting with people whom I was writing up, the advent of technology and the internet has added a lot of flexibility and ease of application for insurance consumers.
Both you and your parents can live in different parts of the country and you are still able to purchase life insurance on them. We do 3 way phone calls in this case to complete the application.
Technology delivered over the internet includes electronic applications, that make ease of application a reality.
Most of the life insurance companies now days have two ways that enable you to purchase the coverage on Mom or Dad regardless of either parties location.
- Voice Signature: The voice signature application will collect all of the necessary information over the phone. No computer necessary. The representative will obtain all the appropriate authorizations and ask all, if any relevent health questions. You and your parent will both be asked to give your voice consent to sign the application just as if you had used a pen on the paper application. This will take about 10-20 minutes and in most cases, you will have the decision as to whether your parents are accepted.
- Email Signature: With the email signature, the insurance company will actually send out two emails. One to you and one to your parent. Both of you then follow the email instructions and you’ll each just sign by clicking on a few different buttons. Once both of you have completed that it will be submitted automatically into the carriers underwriting department. While it is possible you may get an immediate decision regarding the coverage decision, plan on 1 to 3 business days before getting an answer.
Moral of the story…you don’t need to be with your parents to get the life insurance in place. As long as they have a phone you can proceed to do it anytime or anywhere.
Tip #8 Establish An Appropriate Budget
This goes without saying, know how much of your income you can really afford to put out there. Maybe you have decided “I want life insurance for my parents because it can cover all the expenses involved with their death.
You have to think long term here. What good does it do anyone if it becomes tough on you down the road and you feel forced to drop the coverage? Buying coverage down the road just raises the cost.
You want to purchase what you can comfortably afford now. Any amount purchased is better than no coverage. It is never going to be cheaper. Locking in the the cost at an earlier age and better health is key. If your financial situation improves, add the additional life insurance you want but take advantage of your parents age now.
Remember, life happens and unexpected bills arise. Don’t be overburdened with expenses. You will likely regret buying life insurance if you “bite off more than you can chew” so to speak.
This is a big mistake I see made by well intending families. Don’t be pushed out of your financial “comfort zone” over life insurance.
Tip #9 Get Your Parents Consent Upfront
No one can buy life insurance on another person without an appropriate reason. For example, you can’t just take a policy out on someone down the street because you happen to be friends with them. There is no insurable interest there.
We have insurable interest with parents but we must also obtain their consent. In other words, parents must agree to you buying the life insurance on their life. They must be able to answer any and all medical questions on their own.
I understand that you are paying for the life insurance on your parents, but you still must make sure Mom and Dad are “OK” with you doing so. It is the law.
It will go much better for everyone if you have already had that conversation with them. After that, with a capable pro, you are minutes away from having Mom and/or Dad insured regardless of the city and state you live in. Just verify that your agent or broker of choice is licensed appropriately.
Tip #10 Hold Off On Guaranteed Issue Life Insurance If Possible
Guaranteed Issue life insurance is a form of life insurance that has no medical questions. It is for those people who are extremely high risk cases for insurance carriers. Limited life insurance companies offer this type of coverage. However, acceptance if guaranteed regardless of health but there are a couple of reasonable requirments:
- The insured parent lives in a state where the insurance company offers that product
- The insured parent has the mental capacity to enter a legal, binding, life insurance contract
Now, this sounds pretty easy, but as I said, hold off on guaranteed issue life insurance if possible.
- There is a minimum 2 year wait before the full death benefit would be available. Some companies are up to 3 years. The insurer offsets its risk in this way because they do not know about the health condition of your parents. They must assume the worst case scenario. Death due to natural causes in the first couple years would result in a refund of all premiums plus an compounded interest rate up to 10% (depends upon the insurer).
- To top off the minimum 2 year waiting period, you are going to be paying considerably higher monthly premiums. Again, this policy is designed for very high risk applicants, not someone who happens to be a senior citizen. All companies offering these policies will charge for the additional risk they are assuming they have with the applicant.
You can avoid the negatives by simply applying for a no exam, medically underwritten policy instead. You’ll have full coverage upon acceptance and save a lot of money.
There is no advantage to owning guaranteed acceptance life insurance over standard, simplified issue life whole life insurance, ever.
Bonus Tip #1 Don’t Get Hung Up On The Insurance Company Name
This one can be difficult to communicate to consumers sometimes. There are about 6000 insurance companies in the United States. Most people might have a grasp of a few of them who advertise a lot or used by their employer to provide insurance benefits.
So let’s say you might have a handle on 10-15 names. That is not even 1% of the companies out there folks!!
A very small amount of life insurance companies advertise on a large basis so they become a household name. That has absolutely nothing to do with their ability to pay, volume of complaints, financial stability, customer service, etc.
We work with the big names and the small or no names. My life insurance is with a small name company, now owned by Protective Life Insurance Company.
Do I use Protective for seniors…nope!
My key point…
Make sure you have an open mind when buying life insurance for your parents. Every company underwrites (different health questions) their offers for insurance differently. If your parents have a rocky medical history, many household names cherry pick the cream of the crop and shove the average health case into a decline or guaranteed issue policy if they have one.
Take charge of that situation by looking at insurers that you may not have ever heard of previously. They often offer you very competitive rates and aren’t discriminating against your parents because of their picky underwriting.
Remember, all this advertisement of these household names is passed on to the policyholders. How many millions does State Farm, Colonial Penn, Allstate, Farmers for example actually pass on to you?
That is how it really works.
There are all kinds of good quality companies your parents have access to with financials beyond these household names. Companies like A.M. Best do financial condition ratings of the different insurers and publish that data for consumers. You know how many years in life insurance business each company has etc. This shows the real trust factor, not a fancy, high paid spokesman or actor telling you about ABC insurance company.
If you want the best opportunity to get the most affordable life insurance for your parents that you can count on, don’t limit yourself to household names.
You have access to household names with us, but often we may suggest a more competitive offering.
Bonus Tip #2 Do Not Delay
With life insurance, you want to be an action taker. If you are struggling to put it all together, give a professional a call. Don’t spend days trying to research material that is eating up all your extra time. If it hasn’t sunk in, it probably won’t.
Life Insurance is never on sale except in the present moment. Yup, it was cheaper 3, 5, 10 years ago for Mom or Dad. Those rates are gone at this point.
If your need parents life insurance, don’t put this on the back burner. Now days, it is pretty simple to just get it done and have the peace of mind you are after.
Some of you may feel I sound pushy here. I understand your feeling. I’m a consumer too, just like you. However, I have been doing this for a long time now. I am speaking from experience. Lot’s of people call who “wish” they had bought life insurance years earlier. There is NO benefit to waiting if you are in financial position to affordable life insurance on your parents.
Here are my reasons for my “do not delay” position:
- The older your parents get before having life insurance, the more coverage will cost
- Depending on your parents health, you may need guaranteed issue life insurance. If an independent professional cannot find another option, then get the 2 year limited benefit period started sooner than later.
- Parents health is simply not predictable. Know one knows what is coming next. If Mom or Dad ends up in the doctors office and gets a negative report, that works against getting the best rates or eligibility at all
- None of us are going to be less busy than we are now until we retire. While someone puts this off for another, less busy date the likelihood of getting the most affordable coverage diminishes. Sometimes, unexpected realities happen and sadly, the parent passes away and leaves loved ones holding the bag to figure it out.
The Take Home – if you want financial protection on your parents, want to minimize your cost and have peace of mind, get your parents life insurance coverage going now. Take action.
Reasons Why You Should Buy Life Insurance For Your Parents Now
Maybe at this point you have not determined if you really need to buy a policy on Mom and/or Dad.
Now, here is my personal knockout question or a small variation I will typically ask people to help them determine need.
Will you need money to pay for all the expenses related to the death of your parent, spouse or loved one?
If your answer is “Yes” than you should take out a policy for your Mom, Dad or both to cover the costs. Simply do not stretch your budget anymore than you are fully comfortable with.
If your response is “No” than you don’t really need life insurance on them though it is certainly an option that many times pays off.
The common reasons people buy life insurance coverage on parents…
- Funeral and Burial Expenses
- Remaining Medical bills not covered by health insurance
- Debts such as credit card, loans or even remaining mortgage
- Funds to take over parents home or other real estate
If your parents don’t have enough assets or a final expense life insurance policy, any outstanding expenses will become a problem you will have to financially deal with. End of life costs don’t disappear. That is what life insurance for parents solves. As long as the policy premiums are paid at the time of the death, the policy will fulfill the obligations of the insurance company to the beneficiary.
Recap: Buying Life Insurance For Parents
The purpose of life insurance here is to protect family members from a very significant financial loss in the death of Mom or Dad.
If you know that your parents are struggling financially, this is, final expense life insurance is the most cost effective and guaranteed way to insure that financial problems don’t fall on you or any of your kin.
Try helping them save money on their prescriptions. Here is a free prescription drug program from GlicRx. Some people save enough money on their prescriptions to cover their life insurance costs.
If you decide a final expense policy the solution to your problem, be sure to talk with your parents and discuss buying life insurance first. Be sure you are on the same page before proceeding. As I mentioned early in the article, they must consent to the coverage. This will be verified thru a quick phone interview in most cases.
Don’t dismiss any of these tips. I cannot emphasize “Tip #5” from above enough. Whether you decide to work with Maple Valley Insurance Group or not, this is a key component to find the most affordable benefits possible. Make sure you work with a experienced and reputable representative that works with cases like this daily.
Be mindful in 2023 that some additional hard times have struck families. This is the time to have a plan in order for the uncertainty that lies ahead. If you have any questions on how we can help you, please give us a call at 269-244-3420. Hope this article has been helpful to reach a firm decision. Feel free to comment below.