Can I Buy Life Insurance for My Parents?

Can I Purchase Life Insurance for My Parents?

You can buy life insurance for your parents if they consent to it and you can show that you would face financial hardship if they passed away. Typically in this scenario, your parent is the insured, while you are designated as both the policy owner and the beneficiary.

Rules for Buying Life Insurance for Your Parents

Insurance companies require you to meet certain conditions before you can buy life insurance for your parents.

1. Your Parents Must Consent

You cannot buy life insurance for your parents without their consent and participation. Generally, the parent must sign the life insurance application and authorize access to medical records. Depending on the policy, your parents may also need to undergo medical exams as part of the underwriting process.

2. You Must Demonstrate an Insurable Interest

An insurable interest means that you would be negatively affected financially if your parents died. You may have an insurable interest if:

• You rely on your parents for financial support
• Your parents contribute to your household income
• You would be expected to cover their funeral costs and final expenses
• Your share debt with your parents, such as a joint or cosigned loan
• You expect to inherit their mortgaged home, want to keep it and need funds to pay the loan
• The parent who is a caregiver for the other dies, requiring you to hire a paid caregiver or provide care yourself

Learn more: What Happens to Debt When You Die?

3. The Death Benefit Must Be Appropriate

The amount of life insurance you can buy for your parents must be proportionate to the financial losses you would suffer.

Example: If your parents have an outstanding $100,000 mortgage, it's unlikely you could buy $1 million in life insurance for them. However, you may be able to buy $120,000 worth of coverage to pay the mortgage and funeral expenses.

Learn more: How Much Life Insurance Do I Need?

Types of Life Insurance Policies You Can Buy for Your Parents

There are several types of life insurance you can buy for your parents, depending on their health and the expenses you want to cover.

Final Expense Insurance

Final expense insurance offers a limited payout the beneficiary can use to help pay burial expenses and other end-of-life costs, such as medical bills, credit card bills or car loan payments. It is sometimes marketed as burial or funeral insurance.

Nationwide, the median cost of a funeral is $7,848, according to 2023 data from the National Association of Funeral Directors. Death benefits for final expense insurance typically range from $5,000 to $20,000. Although final expense insurance premiums can be expensive relative to the death benefit, this type of policy could be a good fit if your parents aren't likely to qualify for traditional life insurance due to advanced age or poor health.

Learn more: Is Final Expense Insurance Worth It?

No-Exam Life Insurance

Unlike traditional life insurance, no-exam life insurance doesn't require a medical exam to qualify for coverage. There are two kinds of no-exam life insurance:

• Guaranteed issue life insurance guarantees coverage with no medical exam, which is appealing if your parents have health issues. However, the maximum death benefit is limited, typically $25,000. In addition, there's usually a two- to three-year waiting period during which the policy pays out a reduced benefit.
• Simplified issue life insurance requires answering questions about health histories. It may be available as temporary or permanent insurance. Coverage amounts can vary, but are generally higher than guaranteed issue limits, ranging from $25,000 to $500,000. Because the underwriting process is less stringent, simplified issue coverage is usually more expensive than traditional life insurance.

Learn more: How to Buy Life Insurance Without a Medical Exam

Term Life Insurance

Term life insurance covers your parents for a set time, such as 10 or 20 years; you receive a death benefit if they pass away during the term. Term life insurance, which generally requires a medical exam, can be a good fit if your parents are in good health and need more coverage than final expense policies offer. However, many insurance companies do not sell term life insurance to people aged 75 and up, or policies with terms beyond age 80.

Although rates depend on a variety of factors, including your parents' health and whether they smoke, term life insurance is generally less expensive than other types of life insurance. On average, a $500,000 term life insurance policy costs $190 per month for a 60-year-old woman and $265 per month for a 60-year-old man, according to data from Policygenius.

Learn more: How to Get Life Insurance as a Senior

Whole Life Insurance

Whole life insurance is a type of permanent life insurance that lasts your parents' whole life or up to age 99, depending on the policy. Whole life insurance may be easier for older seniors to get than term life insurance.

In addition to the death benefit, whole life insurance accumulates cash value that policyholders can borrow against or use during their lifetimes to pay premiums. However, these additional benefits mean whole life insurance is significantly more expensive than term life insurance.

Learn more: Which Is Better: Term or Whole Life Insurance?

Should I Buy Life Insurance for My Parents?

It may be a good idea to buy life insurance for your parents if you would be financially responsible for their burial expenses, unpaid mortgage or cosigned loans after they die. You may also want life insurance for your parents if they contribute financially to your household or if the death of one parent would require you to financially support or pay for caregiving for the surviving parent.

Life insurance for your parents may not be worth it if:

• Your parents already have enough insurance or assets to cover the costs you're concerned about.
• You can pay for your parents' final expenses with savings or a prepaid funeral plan.
• The life insurance premiums are high relative to the death benefit.

Taking time to run the numbers and evaluate all your options can help you decide if life insurance for your parents makes financial sense.

How to Buy Life Insurance for Your Parents

Follow these steps to buy life insurance for your parents.

1. Talk to your parents. To assess life insurance needs, you'll need to understand your parents' current and projected financial resources (such as Social Security, pensions or investments). Also review any life insurance policies they already own. Finally, consider the financial obligations you may be responsible for when they die.
2. Determine what coverage you need. Based on the information you gathered, decide what type and amount of life insurance to buy. If both parents are living, you'll want to buy a separate policy for each parent. Their coverage types and amounts may differ: For example, the parent who is a caregiver may need more coverage so you can hire a professional caregiver if they pass away.
3. Compare quotes. You can get life insurance quotes from online comparison marketplaces, directly from insurance companies or by working with an insurance agent or broker who represents multiple insurers. Be sure you're comparing the same type and amount of life insurance.
4. Gather personal and medical information. Your parents will typically need to provide information about their health histories, lifestyle, weight, hobbies, tobacco use and more. Insurers may review their medical records or contact their doctors, so it helps to have this information on hand.
5. Apply for a policy and complete underwriting. You or your parents can complete an application using the information you've collected. The insurance company will schedule any required medical exams, which are usually performed at your parents' home.
6. Review and accept the policy. If the policy is approved, review it, accept the terms and designate a beneficiary (you may want your siblings as beneficiaries too). Then pay your premium to activate the policy. You'll generally have the option to pay premiums annually or spread them out over time.

Tip: Consider setting up automatic payments so you don't miss a premium, which could cause the policy to lapse.

Protect Yourself and Your Parents With Life Insurance

Purchasing life insurance for your parents requires having some tough conversations about their finances and end-of-life wishes. Push through the difficulty, and you'll gain valuable insights that can help you protect your parents' financial health.

As part of keeping your parents safe, consider signing them up for identity theft protection from Experian. Experian's identity theft protection alerts your parents (and others they designate) of suspicious activity on their credit reports that could signal fraud. It also scans the dark web for their personal information and includes up to $1 million in identity theft insurance, helping to provide peace of mind.