Should You Purchase a Life Insurance Policy for Your Aging Parents?
You already have a life insurance plan in place for yourself and your spouse. But now, you are wondering whether there’s another piece of the puzzle missing – should you purchase a life insurance policy for your parents?
Perhaps you have witnessed your friend receiving a lump-sum death benefit payout when his/her parents passed away and you plan to receive the same in case of a mishap. Or maybe your parents have co-signed a credit card or loan with you, and you are worried how you are going to manage in case their death results in an automatic default.
Maybe you are also aware of the fact that your aging parents haven’t put aside money for end-of-life costs such as funeral expenses. No matter what the reason is, buying a life insurance policy in Mississauga for your parents can be an appealing option. Here’s how you can proceed.
Can you actually purchase a policy for your aging parents?
Although it can get difficult because you are purchasing a policy on someone other than yourself, even if s/he is related to you, like a parent.
If you want to take out a policy where the name of the policyholder and the insured are two different people, you will have to prove that you have insurable interest. This means proving that you will suffer financially in case the named insured expires.
This can be really hard to prove when you are an adult purchasing a policy for your parent. It is often easier to help your parents apply for an affordable life insurance plan in Brampton and Mississauga that they will own with your name as the beneficiary.
Note: You can pay the premiums on behalf of your parents even if they own the policy.
What are the life insurance options you should go for?
When you are getting a policy for your parents, you need to figure out their needs first to determine the best plan for them.
Term Life Insurance
This policy lasts for a set period of time – typically between 10 to 30 years. It will cover all the basics and pay out death benefits to the beneficiary in case they die when the policy is in force.
Compared to other life insurance policies, term life insurance comes with the most affordable rates.
It can be the best option in case the death of a parent results in a substantial loss of your household income or someone else have to step in for their debts. Your parents will have to apply for this policy themselves.
Whole Life Insurance
This one is a permanent life insurance policy that last the entire life of the policyholder.
In comparison to a term life plan, whole life insurance is more expensive. This plan also comes with a cash-value component acting as a forced savings vehicle.
If you go solely by the cost, we would recommend you to go with a term life plan. Your parents will get the same coverage at a lower cost, but they will have to apply for the plan themselves.
Final Expense Life Insurance
This is the policy that you can easily purchase on behalf of your parents.
Final expense insurance AKA burial insurance will last till your parents die, provided you keep paying the premiums.
You will need to get the consent of your parents to apply for this policy. No medical examination is required; your parents will just be asked to answer some fundamental medical questions. The only catch is if they have a terminal medical condition, this policy won’t be issued.
Guaranteed Life Insurance
If your parents have a terminal medical condition, final expense life insurance will most likely be denied. Guaranteed Life Insurance can then be an option.
It comes with higher premiums, but it can be bought for your parents – no medical questions asked. However, this should be your last resort because it is hardly worth it considering the money you pay for it.
Talk to our experienced life insurance advisors to know about the best life insurance policies for your parents – No fees, no obligation
Our expert life insurance advisors can help you determine the appropriate coverage amount, considering a number of factors like your family income, debts, net worth, existing plans, current health conditions, etc.
We have more than 30 years of experience providing expert insurance and investment advice for both businesses and individuals. Get in touch with our expert financial advisors to know more about the best and affordable Life Insurance Plans for your parents in Brampton, Toronto, Hamilton and Mississauga.