Guide to Buying Life Insurance for Parents
Talking to your parents about taking out a life insurance plan could be an unpleasant experience, but it may be a necessary one too. Some states require consent from the parent before a child can take out a policy. However, buying life insurance for parents is not something new. In fact, it happens every day. If your parents agree to go through the life insurance medical exam, then the rest is easy, especially when you follow the guidance given below:
The importance of life insurance for parents
Apart from the grief of losing one or both of your parents, you soon come to realize the substantial financial burden that may come along with it. Funeral expenses and debts can leave you in a big financial rut. Moreover, a life insurance policy for your parents works as a guarantee to the creditors that their debt will be cleared even after the debtor’s demise.
Should you pay for your parent’s life insurance?
You are allowed to do so. However, make sure that the policy structure is acceptable; especially be sure that the coverage should provide for all of the additional expenses as and when they come.
Term or Whole life?
When buying life insurance for parents, most people choose term over whole life policies. The simple reason for this is that a term policy is more economical. However, keep in mind that these policies are more expensive when taken on an elderly person than a younger one. Term life policies are for a period of time and the person on whom it is taken may easily outlive its term.
Some other factors need to be considered here too. Term life policies do not build equity while whole life policies do. Thus, whole life policies are a savings as well as a death benefit program. However, if you are still keen on taking a term policy, make sure it can be renewed.
You should be able to justify the amount of life insurance you want to buy. For example you cannot buy a policy worth $1 million for your 75 year old parents who take their social security benefits, get a small pension and are not under significant debt. This will raise too many red flags.
To put it simply, such an inflated amount may come under scrutiny of insurers and lead to legal proceedings. So, it is important to make sure that the coverage you buy is modest and goes under the radar of scrutiny.