The Requirements For Buying Life Insurance For Your Parents
Below are the necessary conditions for you to buy any type of life insurance for your mother or father:
- They have an SSN or TIN.
- When applying, they are physically located in the USA.
- They have the mental capacity to sign a legal contract.
- They consent to you buying the policy on them.
- If applying for a policy with no waiting period, they must answer the health questions.
- They sign the application (there are various ways to sign).
Those requirements cannot be waived under any circumstance.
If your parents won’t let you buy life insurance coverage for them, your best option for end-of-life planning would be a pre-paid burial.
Buying life insurance for someone else generally requires “insurable interest.” Insurable interest is when you, the beneficiary, would endure a financial setback due to the insured’s (your parents) death.
The sheer nature of your relationship satisfies the insurable interest requirement if you’re buying life insurance to cover their funeral expenses or moderate financial debts.
Generally, the only time an insurance company might ask you to explain how there is insurable interest is when you’re trying to buy more than $100K in coverage.
It’s best if you are the policy owner
Ideally, you should be the owner, payer, and beneficiary (unless you want the death benefit paid to someone else). That way, you’re the only one who can inquire about the policy or make changes to it. Also, if you own the policy, the accrual of cash value will not interfere with your parent’s Medicaid eligibility.
With a life insurance policy, there are four parties:
- Insured: Your parent(s).
- Owner: The person in control of the policy and who owns any cash value that has accumulated.
- Beneficiaries: To whom the death benefit is paid upon the death of the insured.
- Payer: Whoever pays the premiums.
You can usually name yourself as the policy owner in the application, or ownership can be transferred after the policy has been issued.
Be very wary of buying final expense insurance online. Online applications are normally not meant to be submitted by anyone other than the insured.
If you use online applications from companies such as AAA or Colonial Penn, the insured (your parent) is automatically the owner. You’d be paying for a policy and have no control over it.
To make any inquiries or changes to the policy (even to cancel it), the insurance company would only speak to your parent, and only they could execute changes.
How Much Does Life Insurance For A Parent Cost?
The cost of life insurance largely depends on the following factors: type of policy, gender, age, coverage amount, and your parents’ health history.
Below are some sample premiums for various policy types.
The Full Process To Buy Life Insurance For Your Mother Or Father
The process of buying a parent a life insurance policy is relatively straightforward. Here’s what to expect:
- Obtain their consent: It’s best to start by having a quick conversation with your mom or dad to ensure they are on board with you buying them insurance. If they aren’t, you’re stuck as there is no way to insure them without their involvement.
- Gather info about their health: Getting some background information about their health will enable you to obtain accurate quotes and policy options. Keep in mind that life insurance advertisements are not formal offers. They are just sample prices meant to entice you. To get real and accurate price estimates that your parents will qualify for, you’ll need to speak with an agent or company. They will ask about your parents’ health history.
- Shop around to get quotes: As with any other product or service, shopping around when buying life insurance is the best way to secure the lowest price and best policy terms. You should aim to contact 5-10 different providers. After doing so, you’ll have a confident expectation regarding what the policy will cost and which one is best.
- Identify the insurer you want to go with: Pick the company you want to apply with. Be sure you account for more than just the cost. Price is important, but it’s not the only factor to consider. For example, policy A might be slightly cheaper but have a two-year waiting period. In contrast, policy B might cost a little more but will cover them immediately. Policy B is the superior choice, but ultimately it’s your decision. Just be sure to consider all variables before you choose.
- Submit an application: You’ll need to formally apply, which can often be done by phone, email, in person, or by mail with a paper application. Your parents will need to sign the application (you cannot do this for them).
- Wait for approval– Once you’ve applied, you just need to wait for the decision. Most providers will render a decision the same day; however, depending on the company and product, it could take a few days. If your application is not approved for some reason, you should find out the reason for the decline. Then speak with other companies that were on your list and ensure they won’t decline for the same reason. Once you find another provider, you’ll need to formally apply with them.
- Get policy and begin paying premiums: Once you do secure an approval, you’ll eventually get a policy in the mail. The coverage will begin on whatever day you choose to start making premiums.
Life Insurance For Elderly Parents Over 80
Buying life insurance for parents over 80 isn’t any different from that for other ages. Granted, the options at this age range are limited, but it can still be done (even after age 85).
Here are some of the best companies that offer life insurance for seniors over 80. It’s crucial to remember that these providers may only be available in some states. For instance, these companies (except Transamerica) don’t offer coverage in New York.
Y2 50% payout,
Y3+ full benefits
Which Type Of Life Insurance Policy Should You Buy For A Parent?
There are multiple types of life insurance, all of which work differently. Furthermore, they have different costs. For example, some policies are temporary and some last forever. Some don’t require a medical exam, and some do.
It’s vital that you select the right type of coverage based on your needs. It’s unwise to shop based on the cost alone. Below are some helpful suggestions regarding which type of policy you should choose based on various factors:
- Paying for burial or other final expense: Choose final expense insurance. This is a small whole life policy (usually $50K or less) that will accept applicants with a wide variety of health issues. The death benefit payouts are generally very fast, often taking less than 48 hours.
- Paying for cremation costs: Choose cremation insurance. These are very small policies meant to cover your cremation expenses.
- Mortgage or other debts: Choose term life insurance. Term life policies only last for a limited period of time, such as 10, 15, 20, or 30 years. Financial debts are temporary “problems,” which is why term life is suggested rather than some type of permanent life insurance. The cost of term life insurance is significantly less than all other types of insurance, so you can generally get a lot of coverage for a relatively low premium.
- Very dire health issues: Choose guaranteed issue life insurance. If your parents have dementia, congestive heart failure, or some other kind of ultra-high-risk health issue(s), a guaranteed acceptance policy is likely the only way for you to obtain a new policy for them. These have no health questions because, as the name implies, approval is guaranteed. The primary and unavoidable drawback to these policies is the two-year waiting period. If they die during the first 24 months, the insurer will only refund your premiums plus approximately 10% interest.
How To Get No Waiting Period Life Insurance For Your Parents
Life insurance with no waiting period (often called “immediate coverage”) will pay out immediately even if the insured should die (from natural or accidental death) one day after the policy starts.
To get no waiting period coverage for a parent, you must apply for a policy that asks questions about their health. No medical exam is required, but answering health questions is.
If you apply for any policy that asks no health questions, there will be a two-year waiting period. Death during those 24 months will result only in a refund of your premiums.
Tips To Find The Best Life Insurance For A Parent
Whether you want life insurance for a parent or a grandparent, it’s vital to compare various policies from multiple providers. That’s because each company’s policies vary significantly in price, underwriting, coverage limits, and waiting periods.
The surest way to find the best policy is to work with an independent insurance agency. Independent agencies represent multiple insurance providers rather than just one. An agency’s job is to analyze each company to find the best burial insurance option without favoring one provider over another.
In contrast, captive insurance companies do not allow their insurance agents to represent other providers. For example, State Farm is a captive life insurance company. Their agents can only offer State Farm. If you don’t like State Farm’s offer, the agent cannot recommend another insurer that might give you a better deal.
When you buy through a broker, there is never a cost, fee, or upcharge to the insurance. Plus, you’ll have a single point of contact for ongoing service needs.
How Much Does A Funeral Cost?
Knowing the cost of a funeral is critical when determining how much coverage you should buy for your mom or dad, assuming your goal is to cover their end-of-life expenses.
According to the NFDA, the average funeral (with a burial, viewing, and vault) costs about $9,995. Cremation is less expensive, but not by a significant amount. The average cost of cremation is $6,280.
You can save considerable money if you opt for direct burial or direct cremation. A direct funeral has no memorial services of any kind. According to Funeralocity, the average direct burial costs $5,137, and the average direct cremation costs $2,202.
Shopping around saves you a lot of money on burial expenses. For example, call multiple cemeteries to see which has the least expensive burial plot. Also, you can buy caskets online from companies like Costco. Just know that you don’t have to accept what the funeral home initially offers you.
Frequently Asked Questions
Buying burial insurance for your parents (or any adult, for that matter) without their involvement and consent is not legally possible. Taking out a policy on them without them knowing would be insurance fraud. In all circumstances, the insurance companies require the insured (your parents) to sign the application and agree that the policy will be issued. That’s true even if you have POA over them.
Final expense whole life insurance is the best type of policy to buy if you need coverage to pay for your parents’ funeral costs. It’s permanent life insurance that lasts forever and has a fixed monthly price. Buying a term life insurance policy is not advisable because they generally terminate around age 80. While term insurance products are cheaper, most seniors outlive them, leaving you with no insurance to cover their burial expenses. A universal life insurance plan is also one to consider, given that it is a type of permanent life insurance. The primary difference between whole and universal life is that a UL policy has payment flexibility and costs slightly less. However, universal life, like term insurance, is risky since the payments often increase after age 75, making it unaffordable and thus losing coverage.
If you buy a life insurance policy for a parent and you’re the beneficiary, the death benefit payout you get after they die will not create a tax burden. That’s because life insurance payouts are not considered income by the IRS and thus don’t create a tax liability.
If you want to purchase life insurance to pay for your mom or dad’s funeral bills, first determine what type of funeral they would prefer. Then estimate the cost of their desired funeral to calculate how much coverage you’ll need. The NFDA’s most recent report showed that the average burial with a vault, viewing, and service costs $9,995. Alternatively, a cremation service with viewing costs $6,280. You can significantly lower these costs by opting for direct burial or direct cremation. A direct funeral is when there are no services. The funeral provider immediately buries or cremates the body with no viewing or processions of any kind. The median cost of a direct burial is $5,128, and only $2,196 for a direct cremation.
- Nationally licensed life insurance agent with over 16 years of experience.
- Personal annual production that puts him in the top .001% out of all life insurance agents in the nation.
Anthony Martin is a nationally licensed insurance expert with over 16 years of experience and has personally served over 10,000 clients with their life insurance needs. He frequently authors entrepreneurial and life insurance content for Forbes, Inc.com, Newsweek, Kiplinger, and Entreprenuer.com. Anthony has been consulted as an expert life insurance source for dozens of high-profile websites such as Forbes, Bankrate, Reuters, Fox Business, CNBC, Investopedia, Insurance.com, Yahoo Finance, and many more.
- Nationally licensed life insurance agent with over 20 years of experience
- Best selling Amazon author.
Jeff Root is a nationally licensed life insurance expert with over 20 years of experience. He has personally helped over 3000 clients with their life insurance needs. Jeff is a best-selling Amazon author and the managing partner of a highly successful insurance brokerage that manages over 2,500 licensed insurance agents across the USA. He has been a featured life insurance source for prestigious websites such as Forbes, Bloomberg, MarketWatch, Nerdwallet, and many more.
- Nationally licensed life insurance agent with over 15 years of experience
- Best selling Amazon author of five insurance sales books.
David Duford is a nationally licensed insurance expert with over 15 years of experience. He has personally helped more than 1,500 clients buy life insurance. David has been featured as an expert source for highly authoritative publications such as A.M. Best and Insurancenewsnet. He also runs one of the largest YouTube channels to help aspiring insurance agents serve their clients better.
- Nationally licensed life insurance agent with over 20 years of experience
- Best selling Amazon author.
Jeff Root is a nationally licensed life insurance expert with over 20 years of experience. He has personally helped over 3000 clients with their life insurance needs. Jeff is a best-selling Amazon author and the managing partner of a highly successful insurance brokerage that manages over 2,500 licensed insurance agents across the USA. He has been a featured life insurance source for prestigious websites such as Forbes, Bloomberg, MarketWatch, Nerdwallet, and many more.
- Nationally licensed life insurance agent with over 15 years of experience
- Best selling Amazon author of five insurance sales books.
David Duford is a nationally licensed insurance expert with over 15 years of experience. He has personally helped more than 1,500 clients buy life insurance. David has been featured as an expert source for highly authoritative publications such as A.M. Best and Insurancenewsnet. He also runs one of the largest YouTube channels to help aspiring insurance agents serve their clients better.
Choice Mutual often cites third-party websites to provide context and verification for specific claims made in our work. We only link to authoritative websites that provide accurate information. You can learn more about our editorial standards, which guide our mission of delivering factual and impartial content.
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Insurable interest. https://www.investopedia.com/terms/i/insurable-interest.asp
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Power of attorney. https://www.consumerfinance.gov/ask-cfpb/what-is-a-power-of-attorney-poa-en-1149/
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Funeralocity. https://www.funeralocity.com/average-funeral-price
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Get Quotes. https://securitynationallife.com/for-individuals-families/final-expense-insurance/
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mental capacity to sign a legal contract. https://www.nolo.com/legal-encyclopedia/lack-capacity-to-contract-32647.html
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Mutual of Omaha quote calculator. https://www3.mutualofomaha.com/mobile-quotes/#/iule/
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NFDA. https://nfda.org/
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not considered income by the IRS. https://www.irs.gov/faqs/interest-dividends-other-types-of-income/life-insurance-disability-insurance-proceeds/life-insurance-disability-insurance-proceeds
