Most of the time, when you think about life insurance, you think about yourself. And this includes me. In fact, we just took out some new life insurance policies recently. As parents, this is something that a lot of us consider when we have a spouse or younger children.
However, this isn’t the only time to consider taking out a life insurance policy. In fact, it may be extremely beneficial, from a financial perspective, to consider taking one out for your parents.
This may seem like an odd topic to broach, but it’s actually an important one to consider. There are many reasons why it makes logical sense to take out an insurance policy for parents. And if you haven’t considered this option yet, then please, read on to see why you might want to.
Why should you consider taking an insurance policy out for your parents?
The main reason to consider taking an insurance policy out for your parents is to help cover the expenses after their death. Funeral expenses just continue to rise. And if you, or your parents, don’t have a plan in place to cover them preceding their death, it can cost you thousands. It can also put you into debt long term, depending upon their wishes.
Not only are the funeral costs astronomically expensive, but there are a couple of other reasons why you might want to consider a life insurance policy for your parents.
Prior to their death, they may be in a position where they are racking up multiple medical bills for end of life care. This is another area that can quickly throw you into massive debt, so a life insurance policy could help pay for these bills.
The other area to consider using your parents’ life insurance for helping the surviving parent. After the death of one parent, your surviving parent may not be in the position to live alone anymore. When this happens, you will need to consider the best place to move them. And moving a parent can also cost a ton of money.
This is especially true if you have to move them to an assisted living facility. I can tell you from experience, that some of these can run upwards of $4,000 – $5,000 per month! And I don’t know about you, but I don’t have that kind of disposable income just lying around.
All three of these are really good reasons to begin a discussion with your parents about getting a life insurance policy.
When is the best time to consider taking out a policy for your parents?
There is no real right time to take out a policy for your parents. Every situation is different. But, if your parents are close to retirement, or already there, then that would be a good time to introduce the subject.
Some parents have term life insurance policies well into their 50’s or 60’s already. I know that we fall into this category. So we wouldn’t need to discuss another life insurance policy with our kids until our current policies run out.
But, it’s a good idea to discuss this topic with your parents to see if they have a policy already. And if they do, when it is set to run out, if it is a term policy. They may have changed their term policy over to a whole life policy already. If so, then it would be good for you to know the details of that policy.
However, if they don’t have either type of life insurance policy, then now is a good time to dive into the subject.
When you are approaching this topic with your parents, there are a few key ideas to touch upon.
- Express how having a life insurance policy for them will help take care of them financially if they get gravely ill or when they pass away.
- Bring up the three key items that a life insurance policy could be used for.
- Remind them that this is a good time to discuss their last wishes so you will be ready to fulfill them when the time comes.
- Reiterate that you will be paying for the policy (if they don’t already have one), so as not to burden them financially towards the end of their life.
Once you have relayed all of this information to them, then it’s time to get into the more finite details.
How much coverage do your parents need?
This is not a one size fits all category. Every person and situation will be a bit different. So, this is the first area that would be beneficial to cover with your parents once you have opened up the topic.
Depending upon the type of funeral your parents wish to have, will determine how much the costs will be. However, the average funeral costs today are between $7,000 – $12,000. That’s a pretty big chunk of change! And most of us don’t have that kind of money lying around in disposable income.
This is just one area to add to the equation when deciding how much coverage your parents need. But, you will also need to discuss how much debt they currently have. Because if they pass away, all of that debt will need to be paid off. Some of the most common items in this category are:
- Auto loan.
- Medical bills.
- Personal loans.
- Recurring monthly expenses.
One of my favorite things to do in this type of situation is to create a spreadsheet. I put in all of the companies that debts are owed to, the account numbers, contact information, the amount owed, and the monthly payment. Of course, this information will change with regard to the last two categories. But, if you have this information at your disposal ahead of time, then it will make dealing with all of these debts so much easier when your parents do eventually pass away.
Which type of insurance policy is best for your parents?
When it comes to life insurance policies, there are two main types to consider. These are either a term life insurance policy or a whole life insurance policy. They can both cover your parents with similar amounts of life insurance, but they operate very differently. And, where your parents are in life, including their current state of health, will determine which is the best policy for them.
Term life insurance is what we currently have. This is due to the fact that we are younger and have young children still in the house. With a term life insurance policy, you will choose a specific term for the policy to run. The most common term lengths are 10, 15, 20, or 30 years. We both have 30-year policies because we didn’t want to have to redo the policies 20 years in the future at a much higher rate.
If your parents are older, then a whole life policy may be a better bet for them. With a whole life policy, you can take out tax-free loans against the policy whenever you need it. Therefore, this type of policy may be a better fit for aging parents because you can use it to assist with medical bills or end of life care.
How to get life insurance for your parents?
The first step is to discuss this option with your parents. Then you will need to figure out exactly how much in coverage they will need. After that has been determined, you must decide whether a term or whole life policy is a better option. And last but not least, then you will need to figure out which company offers the best option for you and your parents.
Your decision may be more easily decided by whether or not a medical exam is required, and whether or not you want one. And then, of course, the cost is a big factor after all of that. When it comes to ticking all of the boxes, here are a few companies that I really like for their diversity of options.
Bestow life insurance is a platform that is making life insurance much easier to purchase in today’s market. Bestow has an online application process that is easy to walk through so you can get insurance in minutes, instead of weeks.
They also does not require a medical examination, so the application process is quick and easy. They offer policies ranging from $50,000 to $1,000,000 and cover adults from 18 – 54, so you have a wide range of choices.
LeapLife is an easy way to search, compare, and get recommended personalized life insurance policy quotes. They only need some basic information to run the initial search to get your first insurance carrier matches. LeapLife doesn’t always require a medical exam which helps them get you the best quotes as quickly as possible without all the hassle.
Since they work with 15 different insurance carriers that have an A.M. Best rating of A or higher, you have a plethora of great options to choose from. They cover adults from 18 – 75 years of age and have policy options ranging from $100,000 to $5,000,000.
Policygenius is another life insurance search engine that is an independent insurance broker. So, they can offer policy options from many different carriers, which can widen your search net. However, Policygenius is a bit different than the other companies mentioned thus far because they have many more product offerings.
On top of their term and whole life insurance policies, they also offer disability and long-term care policies. If you are considering a term life insurance policy for your parents, then these may be great additions to consider. Ultimately, they offer coverage to adults ranging between 18 – 85 years of age and have policy options ranging from $10,000 – $10,000,000.
Sproutt life insurance connects you with multiple carriers after answering only 20 simple questions. They are an independent broker who offers term and whole life policies. But, they also offer final expense and graded death benefit policies. These two are great potential options for your parents, as they can cost less money than some of the other policies.
On top of having these extra benefits, they cover adults ranging from 18-100 and have policies ranging from $50,000 – $10,000,000.
Another potentially good option to look into is Fabric. All of their life insurance policies are provided by Vantis Life Insurance Co, so they aren’t the same type of platform I have been dealing with so far. They offer accidental death and term life policies online only.
Fabric only covers adults from 25 – 60 years of age and has term policies ranging from $100,000 to $5,000,000. While the age range isn’t that wide, they focus on helping parents streamline their financial planning all in one place. So, they offer free online wills for anyone that signs up with a life insurance policy.
Ladder life insurance only offers term life insurance and their policies are similar to Fabric, in that they only have one carrier underwriting the policies. They offer policies for adults ranging from 20 – 60 years of age and in amounts ranging from $100,000 to $8,000,000. Even though they only offer term life insurance, their terms are a bit more flexible than most other companies.
With Ladder, most applicants won’t need a medical exam, but it might be a possibility depending upon how you answer certain questions. However, if your parents do qualify for a term policy, you have the possibility of canceling it at any time, for any reason. And if you cancel within the first 30 days you get a full refund. Plus, you have the possibility of increasing or decreasing the policy without any extra fees or hassle.
Life insurance for parents FAQ
When it comes to discussing end of life topics with your parents, it can be difficult. But, talking about taking out a life insurance policy for them can only help all of you in the future.
After all, having a life insurance policy for your parents will help reduce your financial burden upon their death. And it will help pay for their medical bills and end of life costs prior to death, if you choose a whole life insurance policy.
No matter which type of policy you choose to go with, make sure to do your due diligence first. Making sure that the policy is a good fit for you and your parents is the most important factor. Since our parents only want the best for us, a life insurance policy should be no different.