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Buying Life Insurance for Your Parents
Buying life insurance for your parents is not an easy task . After all, searching through various companies and policy types is not fun at all – couple this with the fact that searching for life insurance for a parent requires facing the fact that he/she will die some day, this experience can be down right depressing.
Although buying life insurance (level term or permanent) for your parents is not a pleasant experience, it may be a necessary one. If for no other reason, making sure your parents have a life insurance policy in place will help alleviate your worries about taking care of their burial expenses. If your parents still have outstanding debts, a life insurance policy will also help guarantee the estate can pay the debts upon their death.
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When it comes to buying life insurance for your mother and/or father, you will have to display what is referred to as “insurable interest” to the insurance company. Put simply, insurable interest is a requirement that shows that you will suffer some sort of financial loss in the event of your parents’ death.
More and more often, insurance companies are requiring proof of insurable interest in order to prevent people from randomly taking out policies on people they think may not have long left to live. This also helps prevent the possibility that someone will take out a policy on someone and then killing that person in order to obtain the money – a morbid thought, but a nonetheless real scenario.
In most cases, it is not difficult for a child to demonstrate insurable interest when it comes to insuring their parent (mother or father) and placing themselves as the beneficiary. Once this is established, you need to determine how much coverage will be necessary and what type of coverage will best serve the needs of the parents.
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What Type of Life Insurance To Choose?
In the broadest sense, you can choose from whole life insurance or level term life insurance. With term insurance, your elderly parent (dad or mom) will only be covered for a period of time. With whole insurance, on the other hand, the coverage lasts throughout the remainder of your parent's life. Whole life insurance is a lot more expensive then term insurance. In addition, if your parents are quite old, term life insurance may be purchased to last until beyond you’re the life expectancies of your parents. This is not to say that one is definitely a better choice than the other – it is a very personal decision that must be based on your unique circumstances.
What Amount to Buy?
The amount of coverage you need also depends on the overall purpose of the life insurance. If you are simply looking to have funeral and final expenses covered, an insurance policy with a small pay out of around $10,000 may be sufficient for the job. On the other hand, you may want a larger policy that can be borrowed against in case of medical expenses or that will help pay off other expenses in the event of your parent's death, for example, the dreaded estate taxes.
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