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Can You Buy Life Insurance On Your Parents?
It’s quite common for people to take out a life insurance policy on themselves or a spouse. But can you buy life insurance on your parents? And why would you want to do that?
The answer is yes, you can buy a life insurance policy on behalf of one or both of your parents. Now all that’s left to determine is why and how such a purchase would be made.
Reasons for Buying Life Insurance on Your Parents
Buying life insurance for yourself is done in order to protect those that depend on you from financial hardship after you pass. So it only makes sense then that buying life insurance on another person is done when the death of that person could affect your financial situation.
Many children are still financially dependent on their parents for helping out with things like student loans, cars, rent, health insurance and more. A 2011 study found that 59% of parents still provide financial support for their adult children. And for the first time in more than 130 years, the No. 1 living arrangement among 18-to-34-year-olds is with their parents.
Even if you are no longer financially dependent on your parents, you may still be dependent on them in other ways that hold value. They may watch your children while you are at work, saving you from the expensive cost of daycare. If your parents were to pass away, the cost of childcare is one you would now need to take on.
Another reason for buying life insurance on your parents is to help out with the cost of their funerals. A proper funeral will cost several thousand dollars, something you may not be able to afford in a pinch gut something a life insurance payout can quickly cover.
There are some debts left behind by parents that may be passed on — directly or indirectly — to their children. Unpaid medical or hospice care bills or an outstanding balance on a mortgage, car or credit card can affect how much children receive in their inheritance. But the payout from a life insurance policy can help alleviate those outstanding debts.
Do Your Parents Have to Know?
Having a conversation with your parents about buying a life insurance policy on their behalf can be a difficult one. But it’s also one that typically cannot be avoided. Your parents will have to sign their consent on the policy application and will most often be required to undergo a medical exam.
But talking to your parents about buying life insurance on their behalf may be easier than finding yourself in a financial burden because you didn’t purchase the proper amount of coverage. If you buy too much, you can be faced with expensive premiums. Buy too little and you may not receive enough of a payout when they die.
Find out what kind of debts they have, calculate how much tax may be imposed on their estate and determine how financially dependent you are on them in order to arrive at a comfortable amount of coverage to buy.
A licensed sales agent can answer all your questions about buying a life insurance policy on behalf of your parents. Connect with us online or give us a call at 800-966-7169 today.
Pew Social Trends: http://www.pewsocialtrends.org/2016/05/24/for-first-time-in-modern-era-living-with-parents-edges-out-other-living-arrangements-for-18-to-34-year-olds/
The Balance: https://www.thebalance.com/how-to-calculate-your-estate-tax-liability-3505645
*Applications for insurance may be subject to acceptance by insurer. Rates and coverage amounts will depend upon the carrier selected.