Life Insurance For Elderly Parents: What Are Your Options?

If your elderly parent does not have life insurance, you may be able to take out a policy on their behalf. To do so, you'll need to meet certain requirements, including proving insurable interest, which means that you would suffer financial hardship in the event of their death. You'll also need to get their consent and signature, and they may need to undergo a medical exam. The cost of the policy will depend on factors such as their age, health, and the type of policy you choose.

You can buy life insurance for your parents

Yes, you can buy life insurance for your parents, but you'll need their consent and signature. You'll also need to prove that you would be financially impacted by their death, which is known as having "insurable interest". This could be because you rely on their income, or because you would be responsible for their debts, funeral costs, or medical expenses after they pass away.

To take out a life insurance policy on your parents, you'll need to fill out an application form, which will include some sensitive identification information, such as their Social Security number, as well as a health questionnaire. Depending on the type of policy, your parents may also need to take a medical exam.

The cost of the policy will depend on the type of insurance, your parents' age, and their health. Term life insurance covers a set period, usually between 5 and 30 years, whereas whole life insurance covers your parents for their whole lives, as long as the premiums are paid. Whole life insurance premiums tend to be higher.

If your parents are elderly or have health issues, they may not be able to get a traditional term or whole life policy. However, some companies offer ""guaranteed whole life insurance" that doesn't require a medical exam, although the premiums are usually higher.

You'll need their consent and to prove you will be financially impacted by their death

If you want to buy life insurance for your elderly parents, you'll need to get their consent. They will need to be legally competent to provide such consent and will have to complete and sign the application to show they approve. During the application, you'll also need to provide their Social Security number, name, and address.

As well as consent, you'll need to prove that you will be financially impacted by their death. This is called "insurable interest". Children automatically meet this definition for their parents. You will have to show that you would be financially impacted by the insured person’s death, for example, if you rely on income from the deceased to pay rent, or if they have a mortgage or medical bills that will need to be paid after they’re gone.

The type of policy depends on their age, financial situation, and health

The type of life insurance policy you choose for your elderly parent will depend on their age, financial situation, and health.

Age

If your parent is advanced in age, it may be challenging to find a traditional term or whole life insurance policy. Some companies offer a "guaranteed whole life insurance" policy that won't turn away applicants due to health reasons, but these policies usually come with a higher premium.

Financial Situation

If your family is stable and won't suffer financially from the death of a parent, you may not need to take out a policy. However, if you rely on your parent for financial support, or if they have debts or end-of-life expenses that you would need to cover, then a life insurance policy is worth considering.

Health

The health of your parent will also be a factor in the type of policy you choose. Younger and healthier parents will have access to a wider range of policy options, including term life, whole or universal life, and final expense policies. Older parents who are not in good health may have a smaller potential death benefit and higher policy costs.

Types of Policies

Term Life Insurance

Term life insurance is designed to cover a set period, often between 5 and 30 years. It tends to be more affordable than other types of insurance, making it a good option if you're primarily concerned with covering specific needs like a mortgage or income replacement.

Whole Life Insurance

Whole life insurance, on the other hand, never expires as long as the premium is paid. The premiums are usually higher than term insurance, but it can be a good option if you need a smaller amount to cover end-of-life expenses or other debts.

Guaranteed Issue Life Insurance

Guaranteed issue life insurance doesn't require a medical exam, but it is one of the most expensive ways to buy insurance. It is an option for those who cannot qualify for traditional insurance due to health issues or age, with death benefits typically ranging from $5,000 to $25,000.

Final Expense Life Insurance

Final expense, or burial insurance, is designed to cover funeral costs and unpaid medical bills. It is usually a whole life insurance policy with a small payout.

You can own the policy and be the beneficiary

If you want to own the life insurance policy for your parents and be the beneficiary, you must have "insurable interest". This means that you will need to prove that you would be financially impacted by their death. For example, if you rely on their income to pay rent, or if they have a mortgage or medical bills that will need to be paid after they pass away. Children automatically meet this definition for their parents.

If you are the owner and beneficiary of the policy, you will be responsible for setting up the policy and paying the premiums. You will also need to get consent from your parents before purchasing the policy, and they will need to be legally competent to provide such consent. During the application, you will need to provide their Social Security number, name, and address. Depending on the insurance company and the type of plan, your parents may also be required to undergo a medical exam. The results of this exam will be shared with the insurance company, which will use the information to determine your insurance options.

The type of life insurance you choose will depend on your parents' age and health. Term life insurance is designed to cover a set period, often between 5 and 30 years, while whole life insurance never expires as long as the premium is paid. Universal life insurance is another option, which is a type of permanent life insurance, although some policies have a maximum age. Whole life and universal life insurance policies can potentially build cash value, although this may take many years. These types of insurance are more expensive than term life insurance but will provide a death benefit regardless of when your parents pass away.

When deciding on the amount of coverage, consider your parents' outstanding debts and potential future costs, such as healthcare and final expenses. The payout should ideally cover these costs, but it's also important to keep the premium payments affordable to prevent the policy from lapsing.

Life insurance can help cover final expenses, debts, and medical bills

If your elderly parent does not have life insurance, you may be able to take out a policy on them. This is known as having an "insurable interest" and means that you would experience financial hardship in the event of their death. Insurable interest applies if you have co-signed a loan with your parent, or if you depend on them financially.

Some life insurance policies include a terminal illness rider, which allows the policyholder to access a portion of their death benefit if they are diagnosed with a terminal illness. These funds can be used to cover medical bills, providing financial relief during a difficult time. Certain types of life insurance, such as whole life or universal life, also accumulate cash value over time, which can be borrowed against or withdrawn to cover various expenses, including medical bills.

Final expense insurance is a type of whole life insurance policy specifically designed to help loved ones prepare for the costs that come in the final stage of life. It is typically less expensive than traditional whole life insurance and can ease the financial burden on families. Final expense insurance offers fixed premiums that do not change over time, and the cash benefit can be used to cover funeral and burial costs, medical needs, or other expenses.

If you are considering taking out a life insurance policy on your elderly parent, it is important to get their consent and ensure they are on board with the process. They may also need to undergo a medical exam, depending on the insurance company and type of plan. Additionally, keep in mind that the policy cost will generally be higher the older and less healthy your parent is when you apply.

Frequently asked questions