Children can buy life insurance for parents with their consent. However, life insurance is a generic term, and there lie many criteria while choosing one that suits our needs best. So here are a few tips that help you to choose beneficial life insurance for your parents.
1.Type of insurance:
The type of insurance that better suits your parents depends on a few factors: their health condition, age, and the desired amount of coverage.
There are three types of insurance namely -
Term Insurance, Whole Life Insurance, and Final Expense Insurance.
Term Insurance lasts a specific term such as 10 years or 20 years. Beyond the designated term, the term insurance is no longer applicable. These policies are the most affordable among the whole range. They suit well for those who need to bear the financial and responsibility burden after their parents. However, this policy must be taken by parents, not by children.
Whole life insurance continues for the entire life of the insured person. It is costlier compared to term insurance. In most cases, term policy would suffice rather than this type.
Final expense insurance is a type of whole life insurance that caters to the need to pay the insured person's final expenses. Also called burial insurance, this policy does not need any medical check-up for approval. Children can take this policy for their parents by answering a questionnaire on their parents' medical condition. However, if the insured is already suffering from any existing terminal illness, these policies won’t be granted. Discuss with family and an expert like Everdays to understand which plans work best for you.
To be eligible to take an insurance policy for parents, you should prove that you incur a financial loss due to their death. This is termed as Insurable Interest.
For instance, you cannot claim an insurable interest in the death of a neighbor or colleague.
In case of the death of your parents, the burden of clearing their loans lies on you, then you can claim insurable interest. Also, if you are responsible for paying their final expenses, you can claim insurable interest.
However, if your parents already own life insurance or funeral insurance, you will not be eligible to claim any insurable interest. Thus, you cannot take life insurance for your parents in such situations.
Consent of the insurer is mandatory for any insurance policy, including life insurance for parents. Though you are the one who is going to pay for the insurance, it is important to get the consent of your parents. Even if you can prove insurable interest, your parents’ consent is mandatory to purchase insurance.
Hence, take the time to discuss it with them. Calculate the final expense that has to be met, choose the type of insurance that meets this need, get their consent, and proceed accordingly.
4. Start Sooner
Taking an insurance policy for parents is more beneficial when their age is lesser. It is because insurance policies cost more when the age of the insured increases.
Additionally, when you take policy when parents are healthy, the premiums would be low. Besides, some companies make the waiting period a mandate. When policies are taken earlier, this waiting period passes away without us even noticing it.
Thus, taking life insurance for parents at an earlier stage does not burden the pocket and ensures peace of mind.
5. Skip Guaranteed Acceptance Life Policies:
A guaranteed life insurance policy does not endorse the current medical background of the insured. They are one of the categories of life insurance policies that most people can obtain without much background checks.
However, experts suggest that these policies should be the last option for parents taking a life insurance policy.
The reasons being:
Most guaranteed insurance policies come with a two-year waiting period for the death benefit to be applicable. If death happens within this span, only the premiums are paid back with no extra benefits.
Since these plans do not mandate health checks, they cost more. Insurance companies state the reason for this as more risk factors on their side. However, this does not do much good for the policy takers.
Thus, when considering a life insurance plan for parents at a low premium and with extra benefits, they make guaranteed insurance policies the last option.
6. Get clarity about beneficiary and ownership
The owner of a life insurance policy possesses all rights to change the face amount insured and deal with the technicalities involved in the policy. At the same time, it is the beneficiary who gets the benefits upon the death of the insured.
In case you purchase life insurance to pay off the debts on inheritance property, you may choose to be the beneficiary.
The beneficiary of the insurance could also be the spouse of the insured, child, or close kin. Some people also tend to leave behind a significant amount of property to temples, churches, or any charity. Hence after their death, such organizations would become the beneficiary.
7. Choose the Insurance company wisely:
Insurance market has a wide range of options targeted at senior citizens based on their age and existing medical conditions. Just because one insurance company is well known doesn’t mean it is the best company for you.
Every insurance company has its terms and regulations. You must get a clear understanding of them before submitting the application form.
Compare the insurance policies provided by all the insurance companies and choose the one which suits you most.
To wisely choose the insurance company, work with an independent agent because they give you an option to compare offers from several other companies. Thus, you will have a transparent choice to choose from.
The primary reason you take life insurance for your parents is that they are the most important ones in your life. If you need money to pay for any expense because of your parents' death, it is advised to buy life insurance for them. The expenses might include medical bills, final expenses, debts on property, personal loans, etc. Hence, Taking life insurance depends on your family’s financial situation and mutual content.