Your parents have spent decades caring for you. But as life goes on, there may come a time when you need to take care of them. Perhaps that time is already here. Being a caretaker for your parent means making sure that all of their needs are being met. This can include help with daily tasks, housekeeping, managing their health, and looking after their finances. But the responsibility doesn’t end there. What happens once they pass? Who will be there to arrange their final wishes? If the answer is you, perhaps you should consider some life insurance for your parents. By planning ahead and using the right financial tools, you help to guarantee that their final moments will be handled with dignity and respect. Choosing to protect both yourself and your parents is the best way you can help to serve your family.
Caring for Aging Parents
The act of caring for aging parents takes an emotional and financial toll on many children. In general, it is women who carry the burden of caring for one or more parents. Approximately 66% of caregivers are women. They often handle this responsibility along with raising small children of their own. The unfortunate side effect is that women are stretched too thin. The average woman in her 40s or 50s spends 20 hours a week or more taking care of children and aging adult relatives. This is while still working at least a part-time job. Aside from the toll on a woman’s physical and emotional health, caregivers can also lose out on an average of $324,044 in earnings and Social Security benefits.
Caring for aging parents leaves adult children bearing the full brunt of many responsibilities. This includes orchestrating healthcare decisions, financial decisions, and even end-of-life arrangements. As a caregiver, you are often elected to handle any important legal or financial decisions. If you are in this situation, it is natural to think about the resources needed to lay a parent to rest. Do you or your parents have the resources to pay for funeral expenses? Do they have a life insurance policy or any long-term care insurance? Are there any other family members who will be able to step up and contribute? This may lead you to the question, “Do I need life insurance for my parents?”
Can I Get Life Insurance On My Parents?
In order to take out a life insurance policy on someone, you have to demonstrate insurable interest. This means you cannot just purchase a policy on any random person or casual acquaintance. Instead, you must prove that you have a relationship with this person and that your financial situation would be negatively affected by their death. This often includes having their permission. Insurance companies have stipulations like insurable interest in order to protect against fraud and wrongdoing. Without demonstrating insurable interest, the chances of obtaining a policy on another individual are unlikely.
If your parents already have life insurance policies and are able to make the premium payments, then insurable interest is not a concern. In this case, the adult children are merely keeping the policy active by ensuring premiums are paid on their parents’ behalf. Insurable interest only comes into play if you intend to be the owner of the policy.
What Are the Requirements?
If you are looking to purchase life insurance on your parents, you will likely need to get them involved in the application process. An insurance company will need some personal information from them in order to complete the application. This will probably include their Social Security numbers as well as some signatures. They are also likely to be asked to participate in some type of health questionnaire. This could involve just answering some questions, or it could involve a medical exam or blood test. This is dependent on what type of policy you are applying for and the underwriting practices of your insurance company.
Why Do My Parents Need Coverage?
Determining whether or not you need life insurance for parents comes down to some simple financial analysis. If your parents reside with you, or you with them, you should consider buying life insurance for your parents. This is especially true if your parents contribute to the overall expenses in your household.
If you are not living with your aging parents but are caring for them, you should also consider getting them a life insurance policy. The financial burden of their medical tools and expenses, and any debt they may have, could be covered with a life insurance plan.
Also, if your parents provide any care or assistance with your children, you need to further examine your needs. Their passing would leave you with a void in your childcare plan.
But even if you do not have any financial dependence on your parents, there is still the question of what expenses may accrue in laying them to rest. Perhaps they are lacking the necessary savings or income to handle all of their financial responsibilities. They may have health conditions or medical bills that make having enough money available for final expenses questionable. They may have failed to get life insurance or long-term care insurance earlier in life. Now, you must be the one to concern yourself with the responsibility of their final expenses.
The Cost of Final Expenses
The cost of a funeral and burial services may come as a shock to you. The median cost of a funeral today is around $7,181. The predicted cost of a funeral service in future years is more than double that. It’s projected that by the year 2030 costs will go up to more than $18,000. So, how do you handle expenses like this if you have one or more elderly parents and no funds available to pay for these services? A life insurance plan can help.
Buying life insurance for parents can help to pay for the cost of the funeral, and burial or cremation. The benefit received from final expense insurance can be used to cover the casket or urn, flowers, memorial service, transportation costs, music, clergy, paperwork, grave or memorial marker, and more. But money can also be used to pay for any outstanding expenses the deceased leaves behind. These expenses may include medical bills, long-term care costs, home debt, legal fees, credit card bills, or any other outstanding debt.
What Type of Coverage May I Buy?
There are 4 basic types of life insurance for parents: term, whole, universal, and final expense coverage. Each differs in regard to the length of coverage, amount, cost, and flexibility of benefits. Below is a simple breakdown of each.
Term Life Insurance
Term life insurance provides coverage for a set period of time (up to 30 years). This means that there is a policy expiration date, although many insurance companies allow these plans to be renewed. A term policy is designed to meet short-term coverage goals. Insurance companies can sell simplified issue plans or require a fully underwritten policy. Term plans:
- Provide a death benefit
- Are generally low-cost
- Have customizable death benefit amounts
- May have premiums that increase once initial term period expires
Whole Life Insurance
Whole life insurance is a permanent life insurance product. It offers the policyholder the greatest amount of safety and security. There is also the ability to earn dividends, though earnings are not guaranteed. Whole life plans:
- Provide protection for the customer’s lifetime
- Generally have fixed premiums that remain unchanged over the life of policy
- May include guaranteed cash value
Universal Life Insurance
Universal life insurance has greater flexibility than other long-term life insurance plans. You may customize the coverage and premium amounts to suit your needs. You may also take out loans or make partial surrenders from the policy value. Because these policies allow for such adjustments, your death benefit and cash value could be reduced as a result of withdrawals. Popular characteristics of universal life plans include:
- A modifiable death benefit
- Modifiable premiums
- Loan benefits
Final Expense Insurance
Final expense insurance is a type of whole life insurance designed to specifically cover the cost of a funeral, burial, cremation, and any other related expenses. If you are buying life insurance for your parents, final expense insurance is a great option. It can be paired with an existing life insurance policy. People often do this so that funds will be earmarked for the purpose of covering funeral costs. This frees up other benefits to cover different expenses. Final expense insurance may also be easier to qualify for than other traditional life insurance policies. Special characteristics include:
- Benefits ranging often from $2,000 to $35,000
- Low-cost policies
- Fixed premiums
- The option to borrow against benefits with low interest rates and no credit check
- Optional accelerated benefits for terminal illness
Which Type of Coverage Is Best?
When it comes to determining which coverage to choose, it will come down to personal needs. Selecting a life insurance policy for a young adult contains a completely different set of variables than purchasing life insurance for parents. Young families may consider term life insurance because of its preferred affordability and the amount of coverage you can achieve during those crucial family building years. But when an older person is looking to get insured, a more permanent type of life insurance like whole life is generally the preference. This is because insurance rates tend to be higher for older people. And the older you are, the shorter the amount of time you have to build up the cash value of a permanent life insurance policy. But if your parents are in excellent health and willing to participate in medical screenings, universal life insurance may offer larger benefit amounts at a more competitive rate.
If your parents are seniors or have health issues, they may prefer final expense coverage. You can often secure this type of policy without a medical exam, regardless of certain medical conditions. The tradeoff is that the policies are usually more expensive than plans with underwriting. Also, benefits may be capped at $35,000 or less.
How Much Coverage Do My Parents Need?
How much coverage your parents will need really depends on their current debts and loans, possible medical expenses, and final wishes. If your primary objective is just to have enough funds to cover the cost of a parent’s funeral, then a policy amount designed to cover just these expenses (plus inflation) should be sufficient.
But if you are concerned about inheriting debt, or have concerns that their estate may be diminished because of debt, you may want to consider a larger benefit amount. While children typically are not responsible for parental debts, there are some exceptions. If you are facing the possibility of major medical expenses due to the failing health of your parents, a larger benefit amount may be necessary. More than half the states in the country now require children to pay toward a parent’s medical debt if the estate does not cover these expenses.
If one or both of your parents carries a large amount of debt in relation to available assets or retirement income, you may want to consider a larger life insurance policy for your parents. For instance, if you stand to inherit a home that still has a mortgage, you would be required to make those payments if the money in the estate does not cover what is owed and you plan to keep the home. A licensed life insurance agent can help you identify a benefit amount that can cover your possible future financial responsibilities.
Are There Any Age Restrictions?
If your parents are over 80, finding a good life insurance policy can be a challenge. Age, health, or a combination of both can prohibit some seniors from qualifying for life insurance. Some insurance companies have “age restrictions” for enrollment that can start around the age of 80 or 85.
If your elderly parents do qualify, the price may reflect their advanced age or state of health. High premiums can sometimes outweigh the overall benefit of the policy. You may also want to remain mindful of their future health. Most policies have a waiting period of around 2 years before the full death benefit is available. If you are uncertain of their condition, it is best to tailor your plan to your parents’ needs before purchasing a life insurance policy for your elderly parents.
If you are certain of your need but have run into some obstacles, final expense insurance is likely your best option. This kind of policy will have the most lenient qualifying restrictions and generally does not require much medical scrutiny. It carries enough of a benefit to sufficiently cover the cost of a funeral and related expenses.
Helping You With Difficult Decisions
HealthMarkets is your partner in finding life insurance for your parents. We offer knowledgeable assistance and have dozens of different policies to choose from. We can help find you a policy that meets your personal needs and financial goals. Contact us today at (800) 917-4169, or visit us online to learn more about our life insurance and other insurance products.