Get Life Insurance For Your Parents: A Step-By-Step Guide

Life insurance is often taken out by adult children to cover their parents' final expenses, such as funeral costs, end-of-life medical expenses, and any remaining debts. Before purchasing a life insurance policy for your parents, you must obtain their consent and prove that their death would cause you financial hardship, a criterion known as insurable interest. You will also need to provide their personal information and signature, and they may need to undergo a medical exam. The type of policy you choose will depend on your parents' age, financial situation, and health.

Getting consent from your parents

Understanding the Requirements

Before initiating any conversation with your parents, it's important to understand the requirements for taking out a life insurance policy on them. Firstly, you must have their consent, and they must be legally competent to provide such consent. Additionally, you need to establish "insurable interest," which means that you would suffer financial hardship due to their death. This could include funeral costs, end-of-life medical expenses, inheriting their mortgage, co-signed debts, or financial dependence on them.

Initiating the Conversation

Broaching the topic of life insurance with your parents can be challenging. However, it's essential to set aside time to discuss these issues openly and honestly. Explain the benefits of the policy, including the financial peace of mind it can provide for both you and them. Remember, this conversation should be a collaborative process, and their agreement is necessary to move forward.

Gathering Information

If your parents agree to the idea, the next step is to gather the required information for the application process. This includes sensitive identification information, such as their Social Security number, name, and address. Additionally, be prepared to answer questions about their health, including height, weight, lifestyle habits, and medical history. Depending on the insurance company and the type of policy, your parents may also need to undergo a medical exam.

Filling Out the Application

Ideally, your parent should fill out the application themselves, as they may need to disclose private medical information. However, you can also fill it out on their behalf, ensuring that you have all the necessary information. Remember, the person whose life is being insured must sign the application for it to be valid.

Understanding the Policy Options

There are different types of life insurance policies available, such as term life insurance and whole life insurance. Term life insurance covers a specific period, usually between 5 and 30 years, while whole life insurance covers the insured for their entire life as long as the premiums are paid. Discuss these options with your parents and consider factors such as the duration of the financial obligation you want to cover and their age and health.

Seeking Professional Guidance

If you're unsure about the best course of action, consider consulting an experienced life insurance agent or a financial advisor. They can help you navigate the different policy options, understand the legal and financial implications, and ensure that you make an informed decision that meets your family's unique needs.

Proving insurable interest

To prove insurable interest, you must show that you are dependent on your parents financially and that their death would cause you financial hardship. This could be in the form of a loss of income, or the burden of their financial obligations, such as:

• Funeral and final expenses
• Medical bills
• Outstanding debt
• Mortgage payments

Insurable interest can also be proven if you have co-signed a loan with your parents and would be responsible for paying it off in the event of their death.

The insurance company will investigate the relationship between you and your parents to decide if there is an insurable interest. They will usually require a phone call with the policy owner, beneficiary, and insured person to confirm the relationship and the insurable interest.

It is important to note that you must obtain your parents' consent to take out a life insurance policy on them, and they must provide their signature.

Choosing the right policy

Insurable Interest

The concept of "insurable interest" is fundamental when taking out a life insurance policy on your parents. This means that their death would cause you financial hardship. Insurable interest typically arises when you are responsible for the financial consequences of your parent's death, such as funeral services, burial/cremation costs, end-of-life medical expenses, or inheriting their mortgage. You will need to prove this insurable interest to the insurance company, as it is a legal requirement to prevent people from profiting from someone's death.

Policy Amount

The appropriate policy amount will depend on several factors, including your parent's age, financial situation, and overall health. The insurance company will assess these factors to determine the death benefit amount. It is important to ensure that the policy amount is reasonably close to the financial burden you would face in the event of your parent's death.

Type of Policy

There are two main types of life insurance policies to consider: term life insurance and whole life insurance. Term life insurance covers a set period, often between 5 and 30 years, and is generally more affordable. Whole life insurance, on the other hand, covers the insured for their entire life as long as the premiums are paid and tends to have higher premiums. Consider the duration of the financial obligations you want to cover when deciding between these options.

Medical Exam Requirements

Depending on the insurance company and the type of policy, your parents may be required to undergo a medical exam. This is more common when the insured is older and the potential health risks are higher. However, some companies offer "`guaranteed` whole life insurance" policies that do not require a medical exam, although the premiums may be higher.

Consent

Obtaining your parent's consent is essential before taking out a life insurance policy on them. This involves having an open and honest discussion about the benefits of the policy and its financial implications. Remember that the insured must sign the application, and it is important to be transparent about any private medical information that may be required.

Choosing an Insurer

When selecting an insurer, consider factors such as their reputation, financial stability, and the specific terms and conditions of the policy. It is also beneficial to consult a financial advisor or insurance agent to help you navigate the legal, financial, and tax implications of the policy. They can guide you in choosing a policy that aligns with your family's unique needs and circumstances.

Filling out the application

Consent and Signature

Firstly, and most importantly, you need to get consent from your parents. This is a legal requirement, and without their consent, you cannot purchase life insurance for them. This means having a conversation with them about your intentions and the benefits of the policy. It is ideal for your parents to fill out the application themselves, but you can do it for them if necessary. However, remember that they will have to share private medical information with you. Regardless of who fills out the application, the parent whose life is being insured must sign it.

Sensitive Identification Information

The application will include sensitive identification information, such as your parent's Social Security number, name, and address.

Health Information

The application will likely include a health questionnaire with questions about height, weight, lifestyle habits, and medical history. Be prepared to answer these questions as accurately as possible.

Medical Exam

Depending on the insurance company and the type of plan, your parents may be required to undergo a medical exam. The results of this exam will be shared with the insurance company and will influence the insurance options available to you, including the type of insurance, the death benefit amount, and the policy cost.

Proving Insurable Interest

In addition to the application, you may need to prove that you have "insurable interest." This means demonstrating that you would suffer financial hardship if your parent died. For example, if you depend on their financial support or would be responsible for their debts or funeral expenses.

Choosing the Beneficiary

As the purchaser of the policy, you will be the policy owner and will have the responsibility of setting yourself and/or other beneficiaries. Your parents will be the "named insured" and will not be able to make changes to the beneficiaries.

Choosing the Policy

Finally, you will need to choose the specific policy and company you want to go with. Research different companies and the types of policies they offer (term, whole, final expense, etc.) to find the one that best aligns with your needs and your parents' age, health, and financial situation.

Getting approved and paying premiums

To get approved for life insurance on your parents, you will need to meet certain requirements and your parents will need to consent. The first step is to determine whether you have "insurable interest". This means that the death of the person being insured would cause financial hardship for you. For example, if you depend on your parents financially, or if you would be responsible for their financial obligations, such as funeral costs, end-of-life medical expenses, or an inherited mortgage, after their death. It is important to note that you will need to prove this insurable interest and get consent from your parents, as the insured person's signature is required.

Once you have established insurable interest and obtained consent, you can proceed with the application process. The application will require some sensitive identification information, such as your parents' Social Security number, name, and address. It will also likely include a health questionnaire that asks about height, weight, lifestyle habits, and medical history. Be prepared to answer questions about your parents' current and past health conditions, medications, and any risky activities they engage in. Additionally, the insurance company may request a medical exam for your parents, which is usually a better solution financially as it can result in lower premiums. The medical exam may include recording medical history, taking vital signs, and conducting additional tests depending on your parents' age and the coverage amount.

After submitting the application and any required medical exams, the insurance company will review the information and either approve or deny your request. This process can take a few weeks, depending on the completeness of the application and the receipt of any necessary medical records. If approved, you will be required to pay premiums to maintain the policy. The cost of the premiums will depend on various factors, including the age and health of the insured person, the type of policy chosen, and the death benefit amount. To get the best rates, it is advisable to apply when your parents are younger and healthier, as this will result in more options and lower premiums.

Frequently asked questions