Budding families require all financial protection possible. The high cost of living means that most families need more than one income in order to maintain a comfortable lifestyle and build a financial foundation for the future. Families need greater financial security when children arrive. The loss of a young parent can cause financial and emotional turmoil for the surviving members. Life insurance can help to offset the loss of income and ensure that your family can continue to live comfortably after you are gone.
You should make sure you have your finances in order. However, you must also consider the future of your parents and how they might affect your financial situation as you age. Financial havoc can be caused by long-term illness. You may be able to help your parents if they don’t have sufficient assets, long-term coverage, or life insurance. Consider how your parents’ golden years will impact your financial future. Life Insurance protects your assets and can be used to provide financial security for your parents if they need it.
Why is life insurance so important for parents?
Life insurance protects your assets as well as your family’s future in the event of your death. Families rely on two incomes so if one partner or spouse dies, the survivor could face financial hardship. When children are involved, you need to create a financial plan that will help them achieve major milestones like a college education.
Life insurance can cover funeral expenses as well as paying off any medical debts accumulated by a person after a long illness. When someone dies, it often has a significant financial impact on the surviving family members. The best way to protect your loved ones during times of grief is with life insurance.
Adult children should also be aware of the financial situation of their elderly parents. Parents try to plan for retirement and leave a legacy for their children. Even the best-laid plans can be ruined by serious illness. You may have to take care of your parents financially if that happens. You can reduce your financial losses by purchasing life insurance for a parent.
Elderly parents should have a conversation about their finances with their adult children. Talk to your parents about finances if they have not done so. Otherwise, you could be facing financial loss in the future.
Life insurance for your parents
The surviving spouse may lose their income or face financial hardship if an elderly spouse passes away. A spouse who survives a spouse’s death could also lose their health insurance. A parent who is unable to provide adequate coverage for long-term care can leave them with a lot of bills. There are many reasons that an adult child may need life insurance to protect a parent.
Parents should consider purchasing adequate long-term and life insurance well in advance of their need. It’s a good time to begin looking at both long-term and life insurance if you are a young parent. According to the American Association of Retired Persons about 70% of Americans over 65 need some form of long-term care. Early preparation can help avoid your spouse or adult children being financially burdened.
Life insurance coverage is essential for those in their 20s and 30s who have children and a spouse. If you have a mortgage, this requirement is even greater. If you die unexpectedly before your golden years, your family could face financial hardship. A New York Life survey found that 90% people who require long-term care are provided it at home, in an assisted living facility, or in a nursing home. Medicare covers approximately 22% of long-term care expenses for seniors while Medicaid covers 43%. According the AARP To be eligible for Medicaid long-term assistance, however, you must first exhaust all assets like bonds, checking accounts, savings, and stocks. This can leave your children with very little to no inheritance. If you are in good health, you can purchase a long term care policy before age 40 to avoid spending down your assets later in life.
The cost of long-term care insurance can be very expensive, especially if you are over 40. Kiplinger predicts that long-term care insurance premiums could rise by almost $2 billion between 2029 and 2029, affecting nearly 300,000. Consider adding a long term care rider to your annuity or life policy to avoid the high cost associated with a standalone long-term policy. This type of rider is not available from all life insurance providers and the benefits offered by them vary. Certain types of coverage offer per diem benefits while others reimburse for expenses exceeding a certain amount.
You may have to act if you are an adult child and see a financial problem in the future for your parents. If your father has a low income but doesn’t have life insurance, you might consider purchasing one and making your mother the beneficiary. This is in case your mother dies first. You may also need to buy a policy for your mother if your father relies heavily on her retirement benefits. This will ensure that your father is able to continue living independently in the event of his death.
Consider how much money your parents will need for long-term care, and what assets they might need to replace. If your mother is going to need nursing home care, you will want a policy that provides at least $100,000 in death benefits. Consider purchasing life insurance for your parent that includes an accelerated mortality benefit rider. This allows you to get a tax-free advance for long-term or terminal care expenses.
A life insurance policy that names you as the beneficiary may be an option. If you can see a day when you’ll need to leave your job to carefor your parents, you may end up with your own financial burden. You can get some of the income or assets you lost by purchasing a policy that covers the death benefit. Based on your estimated life expectancy, you can calculate the value of the life insurance policy. To account for inflation, let’s say you are able to contribute $1,000 per month to your dad’s care.
Although insurance codes can vary from one state to the next, in most cases you will need your parents’ permission to purchase a policy that covers you. Your father or mother will likely need to consent to the insurance company requesting a medical examination. You must have a insurableinterest to purchase life insurance for someone else. This means that the beneficiary will be financially affected if the insured dies. Insurable interests are typically only available to family members and business partners.
These are the best life insurance policies for parents
There are many types of life insurance policies available on the insurance market. All of them provide a death benefit for an insured’s death.
Your whole life
Traditionally, parents bought whole-life policies for their own benefit and for their children. You can choose to pay the entire policy’s face value. Whole life pays the full amount. whole-life policies accumulate a cash value over time that you can borrow against, or cash out when the coverage is no longer needed. As long as you pay the premium, whole life policies won’t expire. Many don’t require you to have a medical exam if your age is below a certain threshold. However, a whole-life policy cannot be increased in value.
Universal life
Universal life policies are similar to whole-life policies but have a few key differences. The provider decides how much cash value your whole life policy can accumulate. Universal life policies, however, build cash value using a money market rate. Universal life offers greater flexibility in your life, which allows you to increase your policy’s face value later, provided that you pass a health exam.
Variable life
Variable life policies are a modern form of whole-life insurance. They offer both a death benefit and an investment vehicle. Variable life policies allow you to choose whether to invest your cash value in stocks, money market mutual funds, bonds or other investments. This is a great way increase your policy’s face value. If the investments you make don’t work out, your death benefit could be reduced.
Term life
Low premium term-life policies have been growing in popularity over the past decade. Term-life policies provide a fixed death benefit but do not accumulate any cash value. The term life policy covers the insured only for a set amount of time. You may buy a $250,000, 20-year term life insurance policy. Some term life policies lock in a rate for the entire term. Others allow the insurer to increase the premium as you get older. Many policies let you renew your policy at the end without requiring a medical exam. You will pay a higher rate based on the age of your renewal. Insurance companies offer only term life coverage for people who are at least 80 years old.
Your circumstances will determine which best coverage. A whole-life, universal, or variable life policy can provide protection for your entire life. It also allows you to invest in an investment vehicle that you can use whenever you need it or build a greater death benefit. These policies tend to be more expensive than term life policies.
Life insurance is not an either/or proposition. When you are young and single, you can buy a cash-value policy and then add a term policy after you marry and have children. In case their children become independent and mature, parents often buy term life policies with a 20-year or 30-year duration.
It’s best to purchase life insurance for parents while they are still young and healthy.
Questions frequently asked
My parent has a preexisting condition. Can they get life insurance?
It depends. It depends. Certain types of life insurance policies require that applicants take a qualifying medical examination. For all types of life insurance, people over 50 must have a medical exam.
If I need only coverage for a few months, what type of life insurance should I buy?
Term life insurance covers you for a set period of time, such as 10-30 years. The policy will pay the entire value if the insured dies within the time frame. You can also renew your coverage at the end, at a different rate depending on your age, with many term life policies.
What will my parent’s policy on life insurance cover for long-term care?
It depends. It depends. Even if your parent has an ADB rider on their policy, the death benefit can be used to pay long-term care expenses and reimburse their estate for assets that were used to pay for their care.
Do I have to ask my parents permission to purchase life insurance policies for them?
Although insurance codes can vary from one state to the next, in most cases you will need to get your parents’ permission before purchasing life insurance.
