You can absolutely secure a life policy for your parents. Doing so will offer substantial financial security for your family. Purchasing the best type of insurance depends on their current health, medical history, age and financial situation.
Putting life insurance in place for your parents is a major step in preparation for their passing if they don’t have any coverage already. Even if they do have life insurance, an additional policy can cover funeral expenses for example, while leaving their original policy to cover other costs.
Why Purchase Life Insurance for Parents
- You need help paying for their final expenses. Most families underestimate funeral costs. Prices can vary widely depending on the type of arrangements; burial or cremation. The National Funeral Directors Association estimates the median cost of a funeral and burial at about $8,500.
- You need help paying their medical bills. Unfortunately, the last few years of a person’s life can often be costly. Some folks require expensive prescriptions or medical treatments; others need more doctor or hospital visits. And a few may need 24 hour care. These medical expenses can be difficult to handle.
- You need help handling their real estate. The process of selling their home and moving a surviving parent can cost thousands of dollars. Adult children today will move their surviving parent closer or move them into an assisted living community.
Reality of Purchasing Life Insurance for your Parents
Let’s face it, we buy life insurance to safeguard our family. We want keep them from going through a financial hardship when we die. In the same vein, by having insurance to cover our parents, this would protect us from unexpected costs that could influence our financial stability.
When a parent passes, the surviving family members may not be able to cover their final expenses. Bills and debts plus the money required to cover funeral expenses can be a real hardship.
Questions to ask
The following questions can clarify your goals in protecting your family when your parents die:
- What is the goal of the policy– What specifically will the proceeds of the policy pay for, have a detailed plan in mind
- What kind of policy– Permanent or temporary coverage? Before choosing, it’s critical to understand the details on how each policy works. For instance, if a policy is less expensive than another does not mean it is the optimum plan for you.
- How much coverage is needed– The average cost of a funeral can be $10,000 or more. Moreover, any other debt or final expense such as unpaid medical bills should be included for an accurate coverage amount.
- Who will own and pay for the policy– Each situation is unique. Your state of affairs will establish who is the best owner. Generally, you’ll need consent from your parents to buy a policy for them. Likewise, the person making the payments is normally the owner.
Whoever the owner of the policy is, make sure they understand their obligations.
What Type of Life Insurance is Best for Parents?
With younger folks, a term policy is usually the go to. Term insurance is typically cheaper for higher coverage amounts since most people will outlive the policy. A term policy usually lasts for 10, 20 or 30 yrs and normally requires a medical exam to qualify.
Whole life insurance is the most popular option for ageing parents with adult children. It’s best suited for folks 45-85 that are near or in retirement. This type of policy builds cash value and has no expiration date. Most often, you can be approved without a medical exam. The premium payments are based on age and health. So, the younger/healthier they are when the policy starts, the less expensive the payment will be.
One specialized type of whole life insurance is called Final Expense Insurance. It is specifically designed to cover final expenses and any other end of life costs.
How much Coverage do I need?
Every situation is unique. Factors to consider for your parents –
- What are their monthly expenses
- Is there medical bills that are due
- What is their total debt
- How much is their funeral services
The average funeral is around $10,000. Consequently, final expenses is something that families struggle to afford.
What is the Cost?
Age and health are major factors for the insured. Term insurance is generally the best option for younger folks but is harder to “make the grade” for since most insurers require a medical exam.
On the other hand, whole life plans usually have a higher payments, but include features that term policies lack. These include building a cash value and no expiration date.
Tip to keep insurance costs down
To help keep costs down, get insurance when your young, before your health or age can cause a higher premium. As a result, you will lock in an affordable payment even if your health changes later in life. In the end, these factors along with the amount of coverage will determine the cost.
Here is an example quote for a Final Expense Insurance Policy.
Healthy Male Age 50
$10,000.00 in Coverage
$30.51 a month
‘Not so’ Healthy Male Age 65
$10,000.00 in Coverage
$81.33 a month
In this illustration you can see the substantial difference in the payment based on the age and health of the proposed insured.
Who wants to envision the passing of their parents; no one … however data shows that they will probably pass before their children. This frequently means a close family member, usually a child; has to arrange the services and cover the financial costs involved.
Purchasing life insurance for your parents is a caring and considerate choice. As a result, it would ensure that the funds are there to take care of their final wishes.