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Here’s the most common question:
Can I purchase life insurance on my parents?
The simple answer: yes, you can get life insurance on a parent as long you show insurable interest.
Just know that the term “insurable interest” basically means that if:
...were to pass away, you would suffer from some type of financial loss or hardship.
Once you prove to the life insurance company that a financial hardship will exist due to death, insurable interest is established.
You can then purchase a policy on a parent and be named the beneficiary that receives the death benefit.
For most adults looking at buying life insurance policies for parents, your insurable interest in the policy is easy to demonstrate to the carrier. While you no longer depend on your parents for financial support, there could be a variety financial reasons on why it may make sense to purchase life insurance on your mom or dad.
(Quick note on insurable interest: this only has to be proven if you’re the payor and beneficiary of a policy on your parents. If you’re just helping them with buying decisions and they’re paying the premiums , then insurable interest does not have to be established. Only when you’re the payor and beneficiary of someone else’s coverage.)
…here’s a few examples of insurable interest:
It’s a difficult conversation:
Talking about getting life insurance on mom or dad is not easy.
No one wants to think about loved ones passing away. But, dealing with the death of a loved one while being stressed out because of money is worse! That’s why getting life insurance for a parent is that you should consider, even when you don’t depend on your parents for financial support.
So to lead our discussion on insurance interest, we’ll start with this question:
Why should I buy life insurance on my parents?
Over the last few years, we helped clients purchase life insurance on their parents for various reasons. While each situation is unique, all cases revolve around not wanting to be financially affected by the death of a parent.
Here’s the most common reasons to get life insurance coverage on your mother or father:
Do you know how much the average funeral costs?
It’s common for the funeral and other final expenses to be over $10,000 dollars in 2016. While most senior citizens have at least started making some plans, many are still unsure of how much to save for funeral and burial expenses.
Even with proper burial planning, there can be many unexpected expenses left that the family will have to pay such as:
Often times, securing an affordable whole life insurance policy can be a great solution that can cover these unexpected funeral expenses and take the burden off of loved ones in a difficult time of grieving.
Another common expense that insurance policies are purchased for are:
Do your parents still have a mortgage?
In 2016, it’s very typical the average American over the age of 60 to still have a mortgage balance on their home. Many of these seniors have refinanced or purchased homes later in life and are making monthly mortgage payments.
It’s common for these people to have some whole life or mortgage protection policy in place to cover debt associated with owning a home, but some need to add additional coverage to make sure the home can be left to heirs vs. being sold to pay off the mortgage.
We get frequent inquiries from adult children looking to purchase anywhere from $25,000 to $50,000 in additional coverage that is intended to payoff the some of the mortgage and HELOC on the residential home.
Also, it’s very common for small whole life policies to be bought over the phone to cover small debts such as credit cards or other small loans that may be outstanding. These final expense policies can be purchased quickly and provides loved ones with access to a death benefit that can pay off the debts.
Do your parent’s have the assets or long-term care insurance need for health related expenses?
One of the biggest concerns most adult children have revolves around health care related expenses. Unfortunately, we’ve all heard stories of financial catastrophe due to hospital and medical bills due to declining health. It’s important to have a discussion with parents concerning their long-term care strategy.
If they are self-funding (no long-term care insurance in place), you may want to look into securing life insurance coverage. Depending on the budget, you can review small senior whole life policies($7,500 or less) and also look at the larger whole life policies ($100,000 to $500,000) that may include additional long-term care riders.
Either way, it’s very important to review and plan for end-of-life and health care related expenses for your parents.
The items listed above are the main reasons why adult children purchase life insurance on parents. If any of these (and many other reasons) would likely create a financial hardship in your life, you have proved insurable interest in the eyes of the insurance company.
Once this insurable interest is established, you can be name the beneficiary on the life insurance policy that you take out and pay for your parents. The next step would be to get affordable quotes. You can get started using our online quoter below in 3 easy steps:
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