This guide has everything you need to know about buying life insurance for parents.
So if you are unsure if you need a mom or dad policy, if you want a cost estimate, or just need help to determine what type of policy and company is best for them, this guide will answer all of your questions.
Read on or click one of these quick links below to go to the section of this article that interests you most.
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- Top 10 tips
- Reasons to buy
- Adequate coverage amounts
- Sample quotes [See actual rates]
- Application indicators
- Frequent questions
10 tips when buying a life insurance policy for your parents
Not everyone needs to buy life insurance for their parents. Some do and some do not. That depends on your situation. Sometimes a life insurance policy for their parents is simply not necessary.
For those who want or need, here are 10 proven tips that will ensure that you buy the right policy and get the best possible deal.
1. SELECT THE RIGHT KIND OF POLICY TO MEET YOUR GOAL
As you know, life insurance is a very general term. There are many different types of policies available and they all work differently.
Life insurance is a tool used to fulfill a purpose (what money would be used for). However, not everyone has the same goal in mind, so there is no life policy that fits all types.
For example, some people want life insurance proceeds to pay off a mortgage or other debt. On the other hand, some people want life insurance to cover the final expenses.
Because those needs are different, they guarantee a different type of life insurance policy.
To ensure that you really do your job, it is vital that you select the appropriate type of life insurance that is best suited to achieve your goal.
Life insurance can be divided into two main categories. There is permanent and temporary insurance coverage. Each of them has its pros and cons, and they should be used for different purposes.
Permanent whole life insurance and when to buy it
A whole life insurance policy is a permanent plan that will be in force throughout your life. It will not expire like the temporary insurance that is for the term.
You should purchase a whole life insurance policy when you have a need or if you want it to last for an unlimited period of time. These are some of the most common examples:
- Final expenses (funeral bills, debts, medical bills, etc.)
- Donation to family, charity, etc.
- Estate planning
Not surprisingly, the biggest pro of whole life insurance is the fact that it lasts forever. You can count on it being there to achieve your goal.
The downside to whole life insurance is that it costs more than term insurance that is a term, but that is because the insurance company will have to pay 100% someday.
Again, remember that if the need is permanent, your life insurance should be, too. If the need is temporary, then and only then should you purchase a policy that is also temporary.
Temporary term insurance and when to buy it
A term life policy is one that is designed to expire after a predetermined period of time. At the end of the term, coverage simply ends. For example, it can last 5, 10, 20, or 30 years.
You should only buy a temporary life plan if your goal is to cover a temporary liability that will one day end. These are some of the most common examples:
- Mortgage debt
- Car debt
- Other financial debt
- Income replacement
The biggest pro of term life insurance is the cost. By a wide margin, it is the least expensive of all types of life insurance. However, the downside is that it expires one day. That is why you should only buy term when your goal is also temporary.
Generally, insurers will only issue term insurance that provides protection up to around age 80. Most term insurance ends, before or shortly after the insured turns 80.
If you have a wish or need that is permanent, you shouldn’t buy a term plan. If it will expire before your need is met, then it wouldn’t solve the task you set out to do in the first place.
Don’t be seduced by the lower cost of a term plan when you have a permanent goal. The money you are “saving” each month will not help you when the policy is not available when you need it most because it has already expired.
Wise Tip: If you need a long-term insurance plan for one of your parents, you better call us for quotes. Our quote system is not configured to quote long-term insurance. In 60 seconds, one of our agents will be able to give you all the installment prices you want.
2. AVOID THE CONSEQUENCES OF TAXES BY DOING THIS
If I had to imagine a life insurance policy as a shape, it would be a triangle. It consists of three points that are …
- Insured: The individual whose life the policy insures.
- Owner: The person who pays the premiums and is in control of the policy.
- Beneficiary: the person designated to receive the death benefit at the time of the insured’s death.
To avoid a potential tax bill, you must make sure that two of the three points are the same person.
If the three points are different people, then the death benefit could be considered a taxable gift to the beneficiary.
This situation is often known as the Goodman Triangle or the profane Trinity.
It is important to note that if the income from a life policy is considered a taxable donation (which is not always the case), the tax burden falls on the policyholder, NOT the beneficiary.
Here is a basic example.
Let’s say that Juan wants to buy coverage for his mother, Maria and that he names his son Martin as the beneficiary. The breakdown would be as follows:
- Insured = Maria
- Owner = Juan
- Beneficiary = Martin
Upon Maria’s death, Martin will receive the benefits of the policy since he is the beneficiary. The IRS will consider the death benefit as a gift to Martin since Juan was the owner of the policy.
He paid for a service (the life insurance policy) that resulted in Martin getting a sum of money. In the IRS eyes, they consider that it is no different than if Juan had given Martin a personal check for $ 20,000.
Just remember, if you are considering buying life insurance for one of your parents, make sure that you are the owner and the beneficiary. That way you will have nothing to worry about.
Other tax considerations
Hopefully, we don’t have to worry about creating a tax burden for you. As we said, as long as two of the three points are the same individual, there will be no tax burden.
But wait, it gets better …
There are other things you should know that will also help you make sure you don’t create a tax bill for yourself.
First, the IRS allows a certain annual amount to be awarded to someone without paying taxes.
In 2018, they allowed a gift of up to $ 15,000 per person. This means that you could give someone up to $ 15k away, and you wouldn’t have to worry about paying taxes on that amount.
So let’s say you bought a life policy for your parents. If the face value is $ 15,000 or less, the policy structure doesn’t really matter because it falls below the taxable limit.
Second, you can always buy a life plan for mom or dad and not be the owner. Instead, it would simply be the payer. You would really only do this if your wish was not to be the beneficiary.
It can include the insured (mom or dad) as the owner. That would satisfy the colon requirement (his father would be the owner and the insured).
Being the payer and not the owner is another way to configure the policy correctly if your objective is to name another person as the beneficiary.
What is the conclusion?
There are many ways to ensure that you don’t create a tax invoice for yourself. Working with a specialized insurance agency (Insurance Latino) will ensure that you do not receive an invoice from the IRS.
3. WORK WITH AN INDEPENDENT AGENT
You have to know. There is no single life insurance company that can be the best option for everyone. This is totally impossible.
Everyone accepts and rejects various health problems, so there cannot be a single company that governs them all.
Here is the conclusion:
To find the best life insurance policy for parents, it is imperative that you work with an independent agent because only they can compare offers from dozens of insurance companies. They will simply put you with the company that best suits you and is your best fit.
In the life insurance arena, there are two types of agents that you will deal with:
- Captive Agent – An insurance agent who can only represent one company. For example, State Farm is a captive insurer. A State Farm agent can only sell you State Farm insurance. They cannot represent any other insurance company. State Farm strictly prohibits it.
- Independent Agent – An insurance agent who is free to represent as many independent insurance companies as they want. For example, Mutual of Omaha is an independent insurer. They don’t care how many other insurance companies an agent is appointed with.
The type of agent you work with will greatly influence the quality of a deal you will get.
Think of it this way …
In his left hand, he has a single life insurance company. In your right hand, you have 30 different insurance companies.
If you had to choose a hand when buying life insurance for one of your parents, which hand do you think gives you the best chance of success?
That is the power of working with an independent agent.
Oh and here is something really cool.
There is no cost to work with an independent agent. All agents (captive and independent) are always paid by the insurer, which is why their services never cost you money.
Why is having options so important?
Each insurer subscribes differently, which means that everyone responds to health problems in their own way.
For example, a company may not like diabetics and reject or charge them much more because of their diabetes. On the other hand, another company could totally agree with diabetics and not respond adversely for any reason.
If your mom or dad has diabetes and you work with a captive agent representing a company that is not fond of diabetics, you are out of luck.
At the same time, if you were working with an independent agent, he or she would simply move on to companies that agree with applicants who have diabetes.
Do you see the difference?
The example above works all the time. If your parents have a health problem, it is even more important that you work with an independent agent, so that they can connect you with the company that considers your health most favorably.
Going the independent route will result in better coverage and premiums every time.
4. THE HEALTH OF YOUR PARENTS: GATHER ALL THE INFORMATION YOU CAN
Your parents’ health history is the most influential factor that determines which companies will accept you, exactly what the price will be, and ultimately what is best for them.
For that reason, do your best to become as familiar with your health as possible before beginning to speak to officers.
Any worthwhile agent will try to gather information about your parents’ health history. This will allow them to do their job to find their best plan.
Here is the harsh truth.
If you don’t know your health, there is no way an agent can help you. Sure, you can still get quotes based on their age and gender, but quotes made that way are theoretical at best. To get something like an accurate quote/offer, you will need information about your health.
You should try to get the following:
- Past and Present Prescription Drugs (The More You Can Get The Better)
- Conditions diagnosed in the past and in the present, such as high blood pressure, COPD, CHF, diabetes, etc. (find out when they were diagnosed)
- Previous major events such as heart attacks, strokes, hospitalizations, cancer, etc. (find out when they happened)
- Height and weight
- Tobacco and alcohol consumption.
- Any high-risk habit, such as skydiving, rock climbing, etc.
- Details on any driving violation in the last 5 years
What if you can’t get all that information?
Don’t worry if you can’t get all of that information. Feel free to try, but if you can’t get at least a list of your medications. Your medications will show a very good image of the health problems you have had.
As an agent, we can gain a preliminary understanding of your general health just by knowing the medications.
We would certainly need more detailed information about them before making a request, but just for listing purposes, medications can often provide good estimates.
5. YOU DO NOT NEED TO BE PHYSICALLY WITH THEM TO APPLY
In the past, you had to physically sign the papers, which meant that you and your parents had to be in the same place at the same time.
This is not how it works in the modern era.
You and your parents could live in totally separate states and still buy life insurance for them.
Many life insurance companies today have electronic application processes that make this possible. In general, there are two methods that allow you to remotely purchase a life policy for your mom or dad.
- Voice signature: With a voice signature process, the provider will collect all of your information over the phone. They will obtain all necessary authorizations and ask the appropriate health questions (if any). In the end, the two of you will sign the application with your voice, which will represent your consent, as if you had physically signed the application with an ink pen. Generally, these voice signature processes last 10-20 minutes, and most of them will make an immediate decision regarding the applicant’s eligibility.
- Email signature: With an email signature, the operator will send two emails. One for you, and one for your parents. Basically, you will sign the application by clicking on some buttons. Some email signature providers will issue an immediate decision regarding your parents’ eligibility, but most take 1-3 business days to make a decision.
As you can see, you don’t have to wait until you visit one of your parents before buying coverage for them. You can do it anytime anywhere!
6. KEEP YOUR BUDGET IN MIND
You may want to have a certain amount of coverage for your mom or dad, but the question is … can you afford it?
Here is the conclusion.
If you can’t comfortably pay 12-month monthly payments out of 12, you shouldn’t. Buy less coverage
Don’t feel aggravated or hung up on the fact that your budget won’t allow you to buy what you want.
Certain life insurance coverage for your parents is much better than no coverage!
At the end of the day, you are buying life insurance for your father or mother because you want the money to be used for something (paying a debt, final expenses, etc.).
Isn’t it better to have some money rather than nothing, even when that amount of money is less than you would like?
Many times we have seen that clients try to take more than they can sustain in the long term. It always ends badly because things in life overnight can happen and your will bills will temporarily increase. When that happens, it is likely that the first thing that comes out is life insurance for your parents and then you have lost time and money.
Whatever the monthly payment, you shouldn’t feel remotely unsure about its affordability. Let your budget be your guide and you won’t be wrong.
7. MAKE SURE YOU HAVE YOUR CONSENT FIRST
You cannot purchase any type of life insurance from another person without your consent. The insured must agree to the policy.
This rule is valid even if you have a power of attorney, or if you buy a guaranteed approval policy that has no health questions or medical insurance.
Maybe you’re wondering … But I’m paying for it, so what?
Even if you are going to be the one paying for your parents’ life insurance, you still need their consent.
For the reasons stated, you should definitely talk to your mom or dad or whoever you want to cover your life with life insurance and make sure they are on board so that you can get coverage in that person’s life.
Most of the time, your participation will only consist of answering some health questions and perhaps completing an electronic signature. It will not require much of your time and effort, but you will need to participate again.
So save yourself a little time and headache and ask mom and/or dad first
8. AVOID LIFETIME POLICIES WHICH ARE GUARANTEED ACCEPTANCE IF YOU CAN
A life insurance policy that is guaranteed acceptance is one in which there is no medical or lifestyle subscription. There are no health questions or anything. Its acceptance is guaranteed. There are only two real requirements:
- The insured lives in a state where the insurer offers the product.
- The insured has the mental capacity to enter into a legal contract.
If they meet those two requirements, they can get a policy.
However, just because you can get one of these guaranteed acceptance policies doesn’t mean you should. In fact, it should only be used as a last resort.
Here’s why we say that …
- There is always at least a two-year waiting period before a death benefit is paid. Because they know nothing about the applicant’s health, they should establish this provision to prevent people on their deathbed from buying them and cashing a check a couple of weeks later. If the insured dies during the first two years of the policy, the insurance company would simply reimburse all the premiums paid plus 10% interest (on the money paid, not on the death benefit). After two years have passed, the insurer will pay the full face amount for whatever reason arises.
- They cost much more compared to subscription-based life insurance plans. Because they know nothing about the applicant’s health, they are assuming a much higher level of risk. For this reason, they should charge more for these plans to cover that higher risk. Plans that assess the applicant’s cost of health cost less because the insurer knows that the insured does not have certain health conditions. Therefore, they may charge less.
Finally, if you want life coverage for your parents that starts right away and costs less, avoid guaranteed acceptance plans unless that’s impossible (generally it is).
9. DO NOT CHOOSE AN INSURANCE COMPANY ON THE BASIS THAT THEY ARE WELL KNOWN.
In 2016, there were 5,977 insurance companies in the United States (including territories). If you’re lucky, you’ve heard of maybe 1% of them.
So are the other 99% companies bad because you’ve never heard their name before? Definitely not.
Very few insurance companies advertise on a large scale to ensure they are a household name. They are no more credible, reliable, or financially stable than other insurance companies that do not advertise through the media channels.
So keep an open mind about having insurance for your parents from an insurer you have never heard of.
We say this because each life insurance company underwrites differently. What if your parents have health problems (like diabetes or heart disease) where some of the notable companies don’t take them, but another lesser-known insurer will?
Answer: Go to the other insurer you have never heard of because they will accept your parents and offer you a much better deal because their subscriptions do not disapprove of your health problems.
And make no mistake, these other companies can be completely reliable. Almost all of them are rated A or above with AM Best, have been in business for a long time, and also have strong balance sheets. The question is; You can trust that they will be in business and will be able to pay your claim when the time comes.
At the end of the day, it gives you the best possible chance to get the best life insurance for your parents if you don’t limit yourself to the companies you’ve heard of before.
10. DO NOT LEAVE THIS FOR AFTER
When it comes to life insurance, it pays to be proactive. You simply cannot benefit from waiting.
So if you need or want life insurance for your parents, do it now. You will be glad you did.
Now you may be wondering … why do we make this statement?
It is a fair question. Consider the following:
- The higher the insured is; how much more will it cost.
- Your parents’ health is not guaranteed. If they experience a bad change in their health, this could affect their rates and/or eligibility entirely.
- It may be impossible to avoid a two-year partial or full waiting period. There are some high-risk health problems where this cannot be avoided. In these situations, you want to start reducing the waiting period as soon as possible.
- Things come to life that gets in the way on a daily basis, and if you put it off, it may be years before you do something about it. We see that this happens every day. Obviously, the subject of life insurance for your parents is at the forefront of their minds. Don’t let it slip away without acting! You never know when you will remember to do it (if ever).
Basically, if you want to pay less, get coverage sooner rather than later, and have peace of mind, don’t put it off. Get life insurance coverage for your parents now.
Reasons why you should buy parent life insurance
If you are not sure whether or not you should get a life policy for your dad, mom, or one of your grandparents, don’t be afraid.
The following questions will help you solve it.
Ask yourself …
Will you need money to pay for an expense (s) that arose specifically because your parents passed away?
If the answer is Yes: You absolutely must take out a life insurance policy in order for your parents to be able to pay any bills that arise due to your death.
If the answer is No: you do not need any coverage.
Some of the most common reasons people buy coverage for mom or dad:
- Final expenses
- Medical bills
- Debts (credit cards, personal loans, mortgages, etc.)
- Money needed to take care of your home or another real estate.
At the end of the day, you may or may not need to purchase a life insurance plan for your parents or grandparents. It just depends on the situation of your family.
One thing is for sure. If your parents currently don’t have funds or a plan specifically to pay your final expenses, you really need to get a policy on them. If not, the final costs will fall on you.
How to choose the correct amount of coverage
You are purchasing life insurance for your parents because your death would result in a financial loss of some kind.
With that in mind, what you want the money to be used for will determine the amount of coverage you will need.
Just ask yourself …
How much will it cost to [insert your objective here]?
Your answer will tell you how much coverage you may need.
Wise Tip: Choosing the correct amount of coverage is important. No doubt about it. However, the importance of coverage amounts pales in comparison to selecting the correct type of policy. As noted in wise tip # 1, the type of policy you choose is, without a doubt, the most important part of the process when purchasing parent life insurance.
The average burial costs between $ 8,000 and $ 10,000, according to the National Association of Funeral Directors.
Cremation costs are substantially less. The average cremation with a funeral service will only cost between $ 2,000 and $ 4,000.
Now your exact needs can vary from these averages depending on how elaborate you want your parents’ memorial to be.
With that, those averages give you a good baseline for determining how much coverage you will need if covering the final expenses of older adults is the reason you want coverage.
This is extremely simple. Just add the total amount of debt you will have to pay. That total would be the amount of coverage you would need to buy for your parents.
Just like financial debts, all you need to do is add up all of your medical bills and that is the amount of coverage you will need.
Quotes when looking for coverage to pay your final expenses
If you are buying a policy for your parents or grandparents to pay your final costs, you will need a final expense insurance policy to be able to do that.
Below are some actual life insurance quotes for the final expense.
Important note: You are not limited to these quantities. You can buy ANY amount of coverage between $ 1,000 and $ 100,000 in final expense protection. Plus, you can instantly see the prices of dozens of insurance companies in your state using the quote tool on this page. You don’t even need to enter a phone number or email.
Keep the following in mind when viewing these final expense insurance rates:
- The prices indicated are for whole life insurance for final expenses. These rates never increase, coverage would never decrease, and the policy will never expire at any age.
- Product availability varies by state.
- These are the non-tobacco rates. If your mom or dad has smoked cigarettes in the past year, they will almost certainly pay a higher premium.
- Your parents’ health could affect these prices and/or eligibility.
- In Montana, women pay the same rate as men.
|AGE||For Women $ 10,000||For Men $ 10,000||For Women $ 20,000||For Men $ 20,000|
|Four. Five||$ 22.61||$ 25.45||$ 42.01||$ 47.69|
|46||$ 23.02||$ 26.17||$ 42.84||$ 49.15|
|47||$ 23.55||$ 27.02||$ 43.89||$ 50.84|
|48||$ 24.18||$ 27.96||$ 45.16||$ 52.72|
|49||$ 24.48||$ 28.52||$ 45.76||$ 53.85|
|fifty||$ 24.67||$ 29.16||$ 46.14||$ 55.11|
|51||$ 25.45||$ 30.30||$ 47.70||$ 57.41|
|52||$ 25.88||$ 31.12||$ 48.56||$ 59.04|
|53||$ 26.62||$ 32.20||$ 50.04||$ 61.20|
|54||$ 27.47||$ 33.61||$ 51.73||$ 64.01|
|55||$ 28.40||$ 35.09||$ 53.60||$ 66.98|
|56||$ 29.27||$ 36.45||$ 55.34||$ 69.70|
|57||$ 30.06||$ 37.91||$ 56.91||$ 72.61|
|58||$ 30.83||$ 39.27||$ 58.46||$ 75.33|
|59||$ 31.70||$ 40.82||$ 60.20||$ 78.43|
|60||$ 32.87||$ 42.76||$ 62.53||$ 82.31|
|61||$ 34.51||$ 45.38||$ 65.82||$ 87.56|
|62||$ 36.06||$ 47.90||$ 68.92||$ 92.60|
|63||$ 37.72||$ 50.52||$ 72.23||$ 97.83|
|64||$ 39.36||$ 53.14||$ 75.53||$ 103.08|
|65||$ 41.01||$ 55.76||$ 78.82||$ 108.31|
|66||$ 43.44||$ 59.35||$ 83.68||$ 115.49|
|67||$ 45.86||$ 62.93||$ 88.52||$ 122.66|
|68||$ 48.29||$ 66.53||$ 93.38||$ 129.85|
|69||$ 50.81||$ 70.11||$ 98.42||$ 137.02|
|70||$ 53.24||$ 73.70||$ 103.28||$ 144.20|
|71||$ 56.63||$ 78.36||$ 110.06||$ 153.51|
|72||$ 60.12||$ 82.92||$ 117.04||$ 162.64|
|73||$ 63.93||$ 88.01||$ 124.65||$ 172.82|
|74||$ 67.78||$ 93.16||$ 132.36||$ 183.11|
|75||$ 72.41||$ 99.53||$ 141.62||$ 195.85|
|76||$ 78.25||$ 106.87||$ 153.29||$ 210.54|
|77||$ 83.51||$ 113.64||$ 163.81||$ 224.08|
|78||$ 88.44||$ 119.86||$ 173.67||$ 236.51|
|79||$ 93.41||$ 126.23||$ 183.62||$ 249.25|
|80||$ 98.43||$ 132.65||$ 193.66||$ 262.11|
|81||$ 106.21||$ 143.00||$ 209.22||$ 282.79|
|82||$ 113.96||$ 153.54||$ 224.71||$ 303.88|
|83||$ 121.31||$ 163.41||$ 239.41||$ 323.62|
|84||$ 128.55||$ 173.28||$ 253.90||$ 343.36|
|85||$ 135.90||$ 183.15||$ 268.60||$ 363.10|
|86||$ 174.17||$ 220.83||N / A||N / A|
|87||$ 186.67||$ 242.50||N / A||N / A|
|88||$ 198.33||$ 264.17||N / A||N / A|
|89||$ 210.83||$ 285.83||N / A||N / A|
Taking the first step when you’re ready to buy
When you’ve decided that you do want a life insurance plan for your parents, the question arises …
Where should I start; what do I do now?
Start by talking to them first.
Clarify if you agree to obtain a policy. As mentioned above, you must have your consent. There are no exceptions to this rule (even if you have POAs).
Also, get all the information you can about your health. The more the better.
With those two tasks completed, then you need to find a freelance life insurance broker.
As you can imagine, we highly recommend Insurance Latino. See what our clients say about working with us.
Whether you come with us or not, be sure to find a reputable independent agency that has access to dozens of life insurance companies.
Tell them your goals and give them as much information as you can about your parents’ health.
Your job will be to compare deals from the dozens of life insurance companies they represent to see which one is best for you and your parents.
At that time, they will help you send a request to the operator of your choice.
Speaking of the app, you can expect one of the following processes.
Your agent will gather all the information about you and your parents to completely complete the application. At that time, you, your agent, and your parents or grandparents will complete a short phone interview with the insurance company.
They will obtain the necessary authorizations from both you and your parents. In addition, they will ask their parent’s health questions for registration.
Almost all operators who have a voice signature application will give you an instant decision regarding your eligibility for that phone call.
That means you will know at that time if they have been approved or not. Most phone interviews take around 15 minutes.
Both you and your parents will sign the application with your voice, so no document needs to be signed at any time. That 100% call takes care of everything.
EMAIL SIGNATURE (EMAIL)
Wait for your agent to gather all the necessary information to complete the entire application. At that time, I would receive an email from the insurance company for you to sign. One email would go to you and one to your parents.
Basically, you click a few buttons to sign the application electronically, which will send you to the subscription.
Some operators offer an instant decision when the request is made via email signature. However, some may take 1 to 5 business days before a decision is made.
Either way, the email signing process takes care of everything. You will not have to sign any documents at any time.
In some rare situations, it may be necessary to send you a paper application for you and your parents to sign.
Basically your agent would collect all the information and put it in the app. They would then email, fax, or mail the documents for you to sign. You sign them and send them to your agent.
Once they receive it, they also sign it and send it to the subscription. Expect paper applications to take 1-5 business days before subscription returns with a decision.
Fortunately, it is very rare these days that a paper application is really needed.
These are some of the most frequently asked questions we receive about purchasing life insurance for parents.
Side note: If you have a question not on this list, please let us know! You can call us at (877) 522-6218 and one of our agents will respond immediately. On the other hand, you can email us at firstname.lastname@example.org, and we will post the question and answer to this item within 3 business days.
Q: Can I buy a policy for my parents?
A: Yes you can. It is quite common for children to buy coverage for their mom or dad. Even if your parents have a policy now, you can still get another one on them.
Q: Can I purchase a policy for my grandparents?
A: Absolutely if you can! Every day we help grandchildren obtain life insurance for their grandparents.
Q: Do I need your consent to purchase life coverage for my parents?
A: Yes, you certainly need it. There is no scenario in which you buy life insurance for any adult without their consent. This rule applies even if you have legal power over them.
You just can’t get around this rule. Unfortunately, even if you are the one willing to pay for the coverage, if you don’t want to, there is nothing you can do.
Q: What is insurable interest?
A: This refers to whether or not the beneficiary of the policy would be financially affected in some way by the approval of the insured.
For example, you have an insurable interest in your parents because if they died, you would be responsible for their final expenses.
To put this in perspective, you couldn’t buy life insurance for your coworker. Why can you ask? Well, you would not experience any kind of financial loss due to your approval.
Here is the point.
Simply being the child/grandchild of your parents/grandparents meets the insurable interest requirement 99% of the time.
Q: What is the difference between the owner and the beneficiary?
A: The beneficiary of a life insurance policy is the one who will receive the compensation payment of the policy when the insured dies.
The owner of the policy is simply the person or entity that has control of the policy. Only they can make changes in the nominal amount, the beneficiaries, or any other aspect of the policy.
For example, let’s say you buy a life policy for your mom or dad. You would be the owner and beneficiary. They would simply be the insured.
If they called the insurance company, they wouldn’t even talk to their parents because they are not the owners. The insurance company would only be willing to speak to you since you are the owner.
Q: Can I name more than one beneficiary?
A: Of course you can! You can have as many beneficiaries as you want. In addition, you can also name as many support recipients (contingents) as you like.
For your information, contingent beneficiaries would only receive money if and only if all primary beneficiaries were not alive at the time the insured dies.
Q: I have life insurance through the military, can I add my parents?
A: Life insurance through the FEGLI program is not our area of expertise. Here is a good post that can help answer your question. VA life insurance is VERY different from coverage through private insurance companies.