Life Insurance for your Parents
While most people likely know that Life Insurance for your Parents is important for those who have a spouse and young children counting on them financially, what many may not realize is that this coverage can also be an essential financial tool for those who are older.
The proceeds of a life insurance policy can be used for a variety of different needs that those who are middle-aged, as well as seniors, could have – and because of that, it can be good financial planning to have life insurance coverage on your parents.
When you purchase this coverage on another individual, though – including immediate family members such as your parents – you will usually have to have both their knowledge and their approval before moving forward.
The good news is that buying life insurance on parents who are under the age of 85 can often be more affordable than you think. But, because all life insurers may price their coverage a little differently from one another, it can be wise to do some policy comparisons before making your final decision on a plan.
Why Your Parents Should Have Life Insurance Coverage
There are many reasons why it can make sense to purchase life insurance for your parents. This is the case, even if you and your siblings are no longer counting on your parents for financial support.
In many cases, a parent or parents may still have unpaid debts at the time of their passing. Many years ago, those who were at retirement age would typically have their home mortgage, and other obligations paid off. Today, however, because people are living longer lives, it is not out of the ordinary for people who are in their 60’s – or even older – to have outstanding balances on a mortgage, automobiles, credit cards, and other items.
Parents will also likely have funeral and other types of final expenses that family members could be responsible for paying. Today, when you consider the cost of a memorial service, along with a headstone, burial plot, flowers, transportation, and other related items, final expenses can average $10,000 or more.
Having life insurance to pay these expenses can relieve adult children from having to dip into assets or the estate – or reach into their pocket – for getting them paid off. And, because the proceeds from a life insurance can be received income tax-free, going this route can be much more cost effective than selling off stocks or other assets that may require taxes to be paid when sold.
What Type of Coverage Should You Buy for Mom and Dad?
There are several types of life insurance coverage to consider in the marketplace – and the one that is best to purchase for your parents will be based on the specific situation, as well as whether or not your parents already have some amount of life insurance coverage in place.
There are two primary types of life insurance that are available for purchase. These are term and permanent coverage – and there can be a big difference in what you get for your premium dollars.
Term Life Insurance Coverage
Term life insurance is considered to be the most basic type of life insurance. This is because term offers death benefit only protection, without any cash value or savings build up within the policy. Because of this, term life insurance can oftentimes be affordable – especially if the applicant for coverage is in good health at the time they apply and are not quoted at a higher rate due to smoking or a health concern such as diabetes. If you are looking for affordable life insurance for diabetics, look no further. Let us help you find and obtain the coverage you deserve.
People purchase term life insurance for a certain period – or “term” – such as 10, 15, 20, 25, or 30 years. (There is also a 1-year renewable term life policy option that is offered by many insurers). In some cases, once the time period has elapsed, the term life insurance policy will simply expire. In other instances, the insured will have the option of converting the term insurance policy over into permanent life insurance coverage.
If you are seeking “temporary” Life Insurance for your Parents that typically has an affordable premium, then term life insurance may be the best way to go. If, however, you are looking for a life insurance policy that will last for an indefinite period, then you may want to instead consider a permanent policy.
Permanent Life Insurance Coverage
A permanent life insurance policy will not only cover your parent (or parents) with death benefit protection, it will also provide a cash value component within the policy. This cash value is allowed to grow on a tax-deferred basis. This means that there is no tax due on the earnings within the plan unless or until the money is withdrawn.
The funds that are within a permanent Life Insurance for your Parents policy can be either borrowed or withdrawn for any reason. So, provided that there is an ample amount of funds inside the policy, your parents could use it for supplementing their retirement income, paying off debts, or even for taking a nice vacation.
The premium amount that is charged for a permanent life insurance policy will typically be locked in and guaranteed not to increase – even as your parent gets older, and regardless of whether they contract an adverse health condition in the future.
There are several different types of permanent life insurance to choose from. These can include the following:
- Whole Life Insurance – Whole life insurance is the most “basic” form of permanent life insurance coverage on the market. With whole life, the insured will be covered with a guaranteed amount of death benefit for life, as long as the premium continues to be paid. The amount of the premium that is paid is also guaranteed not to increase – regardless of the insured’s advancing age and / or health condition. The cash value that is inside of a whole life insurance policy will grow at a set, guaranteed rate of interest. With some whole life insurance policies, the policyholder may also be paid a dividend. This dividend can be taken in the form of cash, or alternatively, it can either be added to the policy’s cash value or used for purchasing additional amount of insurance coverage. This type of coverage can be beneficial for your parents, as it offers several guarantees.
- Universal Life Insurance – Universal life is also a form of permanent life insurance coverage. It, too, has a death benefit and a cash value component. However, universal life is considered to be more flexible than whole life insurance. One reason for this is because the policyholder can – within certain guidelines – alter the timing of their premium payment for the policy. They may also be able to decide how much of their premium goes into the cash component and how much will be put towards the death policy’s benefit.
- Indexed Universal Life Insurance – Indexed universal life insurance is yet another form of permanent life insurance protection. With this type of policy, the growth that takes place within the cash value component will be based on the performance of an underlying market index (or multiple indexes). If the underlying index performs well, the cash value will increase – up to a stated “cap.” If, however, the underlying index performs negatively, there will be no losses shown in the cash value. Rather, it will usually just be credited with a 0% for that period of time. This can be a beneficial form of coverage, as it offers death benefit protection, as well as protection of principal within the cash component.
- Variable Universal Life Insurance – There is also variable universal life insurance. While this is a form of permanent life insurance coverage, the performance of the cash value component is dependent on underlying investments such as mutual funds – and, although this can provide the opportunity for nice growth, it can also be risky, as the funds can also lose value in a down market. For this reason, variable universal life insurance may not be an ideal choice for parents – especially if they are age 60 or over and do not have a high tolerance for risk.
Will Your Parents Qualify?
After you have chosen a life insurance policy type and amount for your parents in Life Insurance for your Parents, the next step is to apply for the coverage. Doing so will entail completing an application for coverage where the insurance company will ask for information about the applicants. This will include details about their age, occupation and income, and overall health condition. It will also entail providing information about any medications that they take, as well as their family health history. Here most important is Life Insurance for your Parents.
In addition, it is likely that your parents will be required to undergo a medical exam as a part of the underwriting process. (There are, however, no medical exam life insurance policies available that can allow those who have various health condition to still qualify for coverage).
During the medical exam, your parents will typically be asked some additional health-related questions, and they will also need to submit a blood and urine sample. These samples will be tested for certain health related issues.
How to Purchase Life Insurance for Parents
There are several steps that you will typically need to take in order to buy Life Insurance for your Parents coverage on your parents. Just as with any other life insurance purchase, it is important to ensure that you will have the proper type of coverage, as well as the right amount of protection.
In this case, it can often help to work in conjunction with your parents to determine an appropriate amount. For example, finding out their plans for their final interment can be helpful, as you can then get an idea of the cost of their final expenses.
In addition, it can also be a good idea to ask your parents whether they will have any type of estate tax issue in the future. If this is the case – and if they do not presently have any other plans in place – then the purchase of life insurance to cover this obligation can end up saving you (and your siblings) a great deal of money down the road.
Should the coverage be for the payment of estate tax, it can be wise to work with an estate planning expert or attorney, who can help to ensure that the life insurance coverage will not also be counted as a part of your parents’ estate.
In order to purchase life insurance for anyone – including your own parents – it will be required that you prove insurable interest in the insureds. This means that the insurance company needs to know that you will suffer some sort of financial loss at their passing.
In many cases, this can be fairly easy to show, as often heirs can suffer a great deal financially if they are required to pay estate taxes, funeral, and other final expenses, or other debt obligations that they could be responsible for.
How and Where to Find the Best Premium Quotes for Your Parents’ Coverage
When searching for the best premiums on life insurance for your parents, it is often wise to work with an insurance agency that has access to multiple life insurance carriers such as Banner Life to name a great one! That way, you will be able to more directly compare coverage, benefits, and the premium prices – and from there, you can determine which of the plans will be best for you and your specific situation. However, if you are searching for information such as State Farm life insurance quotes, you may want to think again before making your decision.
We can assist you in this process. We work with many of the top rated life insurance companies in the industry, and we can work with you in finding the policy that works for you. If you are ready to move forward, then please just fill out the form on this page.
If you have any questions regarding how to go about purchasing life insurance for your parents – or even if you just have a question about life insurance in general – please give us a call. We can be reached directly at 877-400-0484. We look forward to speaking with you.