You will need to have their support to obtain life insurance.
If your parents do not have insurance or the finances to cover their expenses in later years, they can purchase life insurance for them.
Life insurance can help you pay for the final arrangements, such as a funeral, or help with your parents’ care. You may be able to access the benefits of some policies before they die in certain situations.
To find the best coverage for your family, you will need to work closely with them.
Benefits of purchasing life insurance for your parents
A January 2020 AARP survey found that 42% expect their parents to provide financial support on a regular basis. Many people are part of the “sandwich generation”, buying groceries and paying rent for their parents, while raising their children or paying for expenses for them.
Although it is less expensive than saving diligently for retirement, life insurance can sometimes help offset the cost of your parents growing older, says Ryan Pinney, president and CEO of Pinney Insurance. It could take decades for the same amount to accumulate if you start saving today for your parents’ end of life expenses with the stock market or a savings account.
Pinney states that life insurance can be used to multiply your money almost immediately to create an asset or pool to cover long-term expenses. This gives you the opportunity to quickly help Mom and Dad.
You should also consider life insurance for your parents to make up the time lost. If you must take time off to care for your parents, you might lose income. It is possible to keep your house for them to pay off their mortgage debt. You might also find your finances intertwined by a co-signed loan.
If you are worried about being financially affected by the expenses your parents will incur at the end of your life, it is worth considering life insurance. You can purchase a new policy to supplement your parents’ financial needs, or to cover expenses that they may have after their death.
Collaborating to purchase life insurance
It’s not like buying your parents life insurance as a surprise birthday present. You must get their permission to take out a policy that covers someone’s entire life.
Your parents will need to consent to you becoming insured. They may have to take a life insurance medical exam as part of the process as well.
Whoever pays the premiums doesn’t affect the cost of their policy. But you can shop around online to compare life insurance quotes and get the best deal.
Which type of policy is the best?
When you and your parents realize they need life insurance, get moving on finding the right type of life insurance right away, advises Andrew Doerman, vice president of digital distribution and strategy at Legal & General America.
Doerman states that rates will be cheaper if you’re younger and healthier than usual. “And we have seen a lot cognitive decline in elderly parents, so many companies won’t issue policies if there is dementia or Alzheimer’s.”
To simply cover funeral arrangements, you can go with burial insurance, a life insurance policy with a small death benefit that beneficiaries can use as needed. Funeral insurance can be purchased, which pays directly to the funeral home for pre-arranged services.
Term life insurance can be a good choice if your parents need coverage only for specific years, such as the duration of a mortgage. Remember that no one will receive a death benefit if a term policy expires prior to your parent’s death.
Permanent life insurance doesn’t expire, and also has cash value if you need to pull money out of the policy before your parents die to help cover bills — but premiums are typically much higher than for a term life plan. Plus, that cash value needs many years to accrue, so if you haven’t had the policy for long, the life insurance cash value is negligible.
Benefits for accelerated death
Ask if the plans provide accelerated death benefits when you are shopping for life insurance. These benefits may be more expensive but can help to cover costs such as a terminal illness, life-threatening diagnosis, or long-term care.
Your parents can get a tax-free advance of part of the death benefit to help them in an emergency. This means that you don’t need to draw on other assets to cover those costs.
Remember that accelerated death benefits can reduce your payout if your parents pass away. If you are buying life insurance for your parents who are aging, it may be a good idea to have the option of using some of the funds earlier than having to pay out.