As an adult, you may be financially stable. However, the death of a parent could cause a significant financial burden. Due to increased life expectancies for the elderly, in recent years the number of adults who are over the age of 45 that are caring for elderly parents has increased. This is one of the reasons that the need to buy life insurance for parents has increased as well.
Taking care of a parent is a big responsibility, as is buying a life insurance policy for them. When you are buying a life insurance policy for one or both of your parents it is important to be informed about all of the different types of life insurance plans that may be suitable.
Most parents are retired and depend on their social security and retirement income in order to pay for their everyday needs. This income may not be enough to cover their final expenses. This is where a life insurance policy for parents can help.
Types of Life Insurance Policies for Parents
There are 2 basic types of life insurance policies, as most people are aware of. The first is a term life plan and the second is a whole life plan. The term life plan is for a set amount of time or a certain “term.” The whole life plan is for the rest of your life, as long as the premium is being paid.
Generally speaking, term insurance plans are good for temporary needs. A policy will act to pay for a mortgage or your kid’s college fund. Once these needs are met and you are not responsible for these financial obligations any longer, you may want to cancel your term life plan. So, this is not the type of plan that would be great for a parent to cover their medical and funeral expenses and any other type of expenses that may arise during the time of need. However, if your parents are very old and the set time frame is higher than what their life expectancy is, a term plan might make sense.
There are several types of permanent life insurance plans available. This includes a whole life policy, universal life, guaranteed acceptance for seniors, as well as final expense insurance. In fact, there are senior life insurance policies available that will also help pay for long term care if necessary.
Considerations for Parental Life Insurance Plans
There are several things that you should consider when choosing a life insurance policy for your parents. When you start looking for a life insurance policy you are going to need to show insurable interest to the company offering the policy. This means that you will need to show some type of financial loss that would occur should your parent pass away. The reason for this is because you cannot insure something that does not have a negative financial income when it’s gone. This is also a way to make sure that a person does not take out a life insurance policy on a senior in order to simply make money.
Another consideration is the amount of coverage. You need to think about future expenses. If the primary goal is to simply cover the cost of the funeral arrangements, a policy for $10,000 to $15,000 will typically be enough. However, if you are considering medical expenses because of the ill health of your parents, a larger policy might be ideal. Some of the other aspects to consider when determining the amount are your parent’s retirement income, their available assets, and their current debt.
Cost and Underwriting
The cost of life insurance for parents will depend on the type of policy that is chosen, the age of your parents, and the amount of coverage. A term life insurance policy is much cheaper than a whole life insurance policy. For example, a $500,000 term life policy for 20 years will cost about $3000 a year for your 60 year old father. Of course, this amount will vary based on his health as well as other conditions.
When it comes to the underwriting of the policy you are typically going to name yourself as the beneficiary. However, your parents are going to need to be a part of the underwriting process. If you need your parent’s income, a term life insurance policy may be the best option. If you are just looking for an insurance policy to cover the final expenses for your parent’s funerals, a whole life insurance policy will likely be the best choice because even though whole life policies tend to be more expensive, if you only need a small amount, such as $10,000, the cost will be minimal.
Choosing a life insurance policy for your parents can be difficult as it is not easy to discuss this with them. However, it is something that needs to be completed.