Life Insurance for Elderly Parents
I’m sure you can think of better things to do with your time than buying life insurance for your elderly parents. However, there are some instances in which you need to, especially if you are the one who will pay the final expense bills when they are gone. In this post, I will review the types of policies you should consider, the appropriate death benefit and the involved costs.
Can I Take Out a Policy on My Parent?
Yes, provided there is an insurable interest. Insurable interest is a reason to buy life insurance on someone because you could suffer a financial loss if they die. You will not be able to buy a million-dollar life insurance policy if your parent has nothing to protect or if you will not suffer the financial burden of that amount.
I get a few calls per month from individuals interested in buying high amounts life insurance on their parents just so they can get an inheritance. This approach doesn’t work. Life insurance was meant to protect against a loss and isn’t a reason to create a lavish lifestyle for heirs or give a gift once you’re gone.
The other condition is that your parents must know that you are buying life insurance on them. You can’t buy life insurance without their consent. Since you are the policy owner, and you will get the death benefit once they are gone, they will need to know about it. They will have to sign the application and go through underwriting process if applicable.
Should I Take a Policy on My Parents?
There are a few questions I would ask myself if I were in your situation:
- What is the purpose of the policy – burial, estate planning or other?
- Do they currently have a policy in place?
- What do their finances look like? Any savings, paid off mortgage?
- Are you going to suffer a financial loss if they are gone?
- Can you afford burial expenses?
- How healthy are they?
This should give you something to ponder. Here’s a simple rule to follow: If burial insurance is all you’re looking for, and you can afford the expense without insurance, don’t buy a policy. If, however, you can’t afford those expenses – which can be over $12,000 according to The Federal Trade Commission – then you probably should get a policy.
The most important point is for you to figure out if you would suffer a financial loss should your parents die. For some people, it’s not the burial expense they are worried about; they are worried about mom or dad financially if one of them suddenly dies. How would mom pay the mortgage if dad were gone? How would she pay the other bills? In other words, you may not be the only one affected if one of your parents dies.
Will Your Parents Qualify for Coverage?
Wanting to get life insurance and actually qualifying are two different stories. Life insurance underwriting is where the policy’s destiny is determined. There are so many factors insurers consider to evaluate a potential buyer such as age, gender, medication usage, and hobbies, among others.
When asked if someone will qualify for a policy, my instant answer is sure, but what type of policy? Yes, they can get a guaranteed issue policy, but the benefits will not be paid for the first 2 years, and it’s the most expensive coverage one can buy. What if they need a $500,000 20-year policy? Can they get that?
The higher the face amount you are applying for, the harder it will be to get it issued and the healthier the individual will have to be. In other words, there is a major difference between someone applying for a final expense policy with $25,000 face amount and someone applying for $5 million term life.
Takeaway: Figure out the amount needed, and remember that healthier and younger means lower premium and policy choices. Challenged health equals lower amounts and fewer choices.
Best Life Insurance Types for Parents
There are two main forms or categories of life insurance: permanent and term life. Sure, there are different policies within those categories such as no-exam, simplified issue, final expense, or guaranteed universal life, to name a few, but they all fall into one of the major categories of permanent or term. In reality, there isn’t one policy that fits everyone, so I’ll try to present a few different scenarios based on 3 categories: best health, mediocre health and challenged health.
Best Life Insurance for Top-Health Parents
This is an easy one. Figure out the coverage amount needed and whether you need temporary or permanent coverage. If you’re after term, keep in mind that, in most cases, your parent or parents will have to go through an exam, and you may not be able to buy more than 20 years. Prudential is usually the leader for the elderly population price-wise. If you just need burial insurance up to $25,000, the best choices will be Mutual of Omaha or Assurity. These require no exam and can be issued in 2 weeks or less. It is also best to compare all rates as they change frequently.
Best Life Insurance for Mediocre-Health Parents
This will also depend on how unhealthy your parents are. Did one of them just have a stroke or a major surgery? If they just take prescriptions for high blood pressure and cholesterol and are otherwise in good health, they can get any policy they want, but they will get a substandard rating, which means they will pay more than a super healthy individual. They’ll still be considered top-health individuals if applying for burial insurance, though, and they may not pay a higher rate.
Best Life Insurance for Challenged-Health Parents
At this point, you may want to ask yourself if it’s really in your best interest to buy a policy. Life insurance companies are taking extra risk insuring someone in a challenged health condition. They will sell you guaranteed issue policy, which has a 2 years graded benefit clause, which means if your parent dies within 2 years after buying the policy, the cash benefit won’t be paid in full. The max death benefit they can get is $25,000. If they die in the first 2 years, the beneficiary is only entitled to the premium paid plus 10%.
Life Insurance for Parents Sample Monthly Rates
10-Year Level Term Male
10-Year Level Term Female
Whole Life Male
Whole Life Female
*All rates quoted on this page are for a super-preferred healthy individual who does not use tobacco. Monthly rates are updated as of Jan 2018 and are subject to underwriting approval.*
We all like to delay the painful things in life; it’s human nature. We have tooth pain, and, instead of going to the dentist and taking care of it right away, we wait a few years until the pain is unbearable. We want it now, but we pay a price for the procrastination. Instead of an easy cavity fix, now, we need an implant.
The same is true when it comes to buying life insurance. I get a few calls a week from people who want to buy life insurance after they discover they have a year left to live or, worse, a few weeks.
My point is simple: Don’t wait. If you need life insurance for your parents, you will have a lot more options when they are healthy than not. You will have better options when they’re younger rather than older. And the best part is that you will pay a lot less for it too.
You can run the quotes yourself on this page.