Life insurance for elderly parents has become an important part of securing your family’s future and taking care of your elderly parents at the same time.
When it comes to financial planning it’s important to think about unexpected situations that can mean a financial burden to your family.
Let us face it in its original state. Your parents have loved, taken care, and educated you since you were a child. They may have been great parents.
They are not prepared to handle their last days on earth. They are now old and tired and its payback time. Now you are obligated to take care of them.
You are scared of the obligations that might follow when they pass away. Someone will have to shoulder the cost of burial and other expenses. In many cases, you will be that someone.
It is a known fact that neither you nor your parents like the talk about death. Maybe they think that life insurance issues are too complex to deal with at any time.
One thing for sure, they agree on the importance of ensuring that their loved ones are not left with a financial burden when the worst occurs.
Now is the right time to start talking about it. The emotions are still low, and each party can look at the issue objectively.
First, discussing the matter with your parents may be an important thing to do.
Get to know how much balance they have on their mortgage.
Do they have car loans, debt from credit cards or other financial responsibilities?
In case of any misfortune, these burdens may be passed down to you.
You need to take practical and realistic measures that will militate against such unexpected events.
If having life insurance is the answer to your fears, then getting all the relevant information that will help you make an appropriate decision is very vital.
We all know that life insurance policies are more expensive as we are getting older, and we often have this feeling that insurers are looking to every little detail just to find the reason to increase the premium.
If you are looking for policy there are things that you should keep in mind. The life insurance premium will be higher right from the start, especially if you are looking for life insurance for seniors over 85.
Why Should You Buy Life Insurance For Elderly Parents?
There are many reasons why you should purchase life insurance for your parents. It makes sense if you are not a dependent and do not rely on your parents for any monetary support.
The major reason why a grown-up child needs to have a life policy for his/her parents is to take care of the funeral expenses and other final costs.
Currently, it approximately costs $8000 to $10,000 in burial expenses. This includes the memorial service, the headstone and the burial plot. Therefore, life insurance will be a great plus in helping to offset these unexpected expenses.
Another reason why you should buy a life policy is to make sure that any debts, which have not been paid for, can be offset. With the current breakthrough in health and medicine, our parents are living longer than in the past years.
There are still many older adults at the age of 70, 80 years, 90 years and past, who are still servicing their mortgages, have debts on their credit card, car loans, and many other financial responsibilities.
In light with the facts on file and the above reasons, it is good financial planning to purchase life cover for elderly parents 50 years and above. Its purpose is to safeguard you in the future against any debt that will be passed on to you when they exit this world.
What Information Do You Require Before Purchasing Life Insurance For Elderly Parents?
You may be in doubt as to whether it is possible to purchase life insurance for your aging parents. The possibility is a big YES! It is very common for grown-up children to buy this kind of insurance for their parents.
The insurance company will need proof of the reference to as the insurable interest.
Will you suffer some form of financial misfortune in case your parents die?
Will you be obligated with the payment of your parent’s debt or final expenses?
If you would take over some financial obligations that your parents are taking care of currently, then that demonstrates an insurable interest.
What Steps Should You Take To Purchase Life Insurance For Your Parents?
Once you have decided that you need to buy a life cover for your parents, there are important actions you should take before signing the dotted line. First, you should know how much cover you need to purchase.
If you would like to buy a life policy for paying off particular debts, you need to calculate total debt to get the face amount of the policy.
If the coverage is for taking care of the final expenses of parents, then you need to do some research from different funeral homes to get to know how much it costs to covers the whole funeral process.
Confirm with your parents whether there is hospice or medical bills that are uncovered that you could be obligated with in case of an eventuality. These payments can be a relief to family members if the life cover handles them.
Find out if they will have a challenge with the estate tax.
Do they have any prior arrangements for settling this looming liability?
In case they do not have any arrangements; purchasing a life cover is the perfect way to deal with estate taxes. These funds will protect you from liquidating your stocks assets or investments. It also protects from family disagreements.
You will have to notify an estate attorney though since life insurance that includes estate taxes will have to be kept under a trust.
How Do You Choose The Best Cover For Your Parent?
When choosing a life policy for your parents, there are various types of life policies to choose from depending on their merits. The main ones are permanent life as well time life.
Term Life Insurance
The major objective of this policy is to work within a specific period. It may be 15, 20, or 30 years. Its all depends on the applicant’s age and the company giving the insurance.
Keep in mind that this insurance coverage expires when the time set ends. It is therefore called ‘temporary’ insurance. Term life is not the best option if your goal is to have coverage for aged parents. Parents live longer than the length of the term. It will not be of benefit at all.
If you want your parents to have the permanent life insurance coverage, then you will enjoy the forever-lasting death benefit cover. It is very important for taking care of burial costs. Permanent life policy comes in different varieties.
Whole Life Insurance
A whole life policy is a basic insurance. All parents are under a strict obligation by law to adhere to this policy. It is one of the best policies out here because it offers a death benefit that comes as a guarantee to the insured. It has a lifetime locked-in premium amount.
Even when your parent’s age increases, the premium payment will remain the same. It remains true even if your parents get a health challenge after the purchase of the policy. Whole life is usually more expensive and comprises of cash value that boosts your benefits.
Its cash value also grows at a fixed guaranteed interest rate. This cash will grow significantly in the fullness of time. This cash will not be taxed until the time it will be withdrawn. Other whole life covers carry dividends. (Not guaranteed though)
You can make use of your cash value to apply for a life cover loan, pay the premiums, and withdraw part of the funds. You can also trade your policy for insurance payment. As the value of your cash rises, you get options that are more advantageous.
This type of policy is also known as 7702 life insurance because it complies with tax regulations section 7702. If you partially withdraw your money from cash-value that will be tax-free money.
The premium amount increases with the length of cover term. Policyholders who need short-term coverage will find this a great plus.
For example, consider the case of youthful families having mutually dependent earnings or working class individuals who want to accumulate wealth over time.
Universal Life Insurance
It is the amount of cash that will be directed towards the cash value element of the policy. The policyholder also decides on the cash that will be used as the death benefit of the cover.
Variable Universal Life Insurance
This kind of permanent life cover is not a good alternative to choose for your aging parents. Note that this is so if you have parents who are older than 60 years who desire to keep the value of their cash safe.
The cash element of this insurance cover is open to risks in the market. These funds can highly grow faster than the funds in the whole life cover but can also be lost.
Indexed Universal Life Insurance
It has two components-a cash value and a death benefit. The cash value depends on the current market index. Even though the cash value goes up as the prevailing index rises, it will not have a loss even when the index experiences a loss.
This type of policy ensures the safety of your principal. It is the best option that provides both the protection of the death benefit as well as fund investment that assures you of the safety of the principal.
Second to Die Life Insurance
It is also referred to as survivorship life policy. This policy gives a cover to two parents instead of one. The payment takes effect when the death of the second person occurs.
This form of policy is more costly than a single policy, but it is cheaper if you are thinking of purchasing two different policies on two parents.
Accessing Life Insurance Cover On Your Parents
When you have chosen the suitable life policy you want to obtain on your aged parents; it is time to check whether they meet the requirements for coverage.
You can achieve this by making an initial application to an insurance carrier. The company will assess your parent’s physical condition and their health history. They will also check on these factors:
- Employment history and income status
- Medication records
- The frequency of overseas travel
- Health records
- status of Smoking
- leisure pursuit and habits
- Other active life insurance including the amount
Your parents will go through a medical examination that lasts for approximately half an hour. It can be at the home of your parents or a suitable location. The process depends on the policy type and the amount of coverage you want to purchase.
A paramedical expert will meet your parents to interrogate them on issues of their health. The paramedic will take a urine and blood sample from them. The insurance company will test these to ascertain your parents’ exact health status.
Once the insurance company has all the health information of your parents in place, the insurance carrier will determine your parent’s life cover. They will also settle on the amount of premium you should pay.
Options For Parents Who Are Not In Good Health
What if your parents have a huge health problem? Can they still get an appropriate life insurance covers?
Options are still available if
- You are obtaining life policy for aged parents,
- Your parents have a high-risk health condition or deem to be non-insurable under any life policy.
Guaranteed Issue Life Insurance Cover
A guaranteed issue life insurance cover is the best option. This kind of insurance coverage does not require a health check-up. Aged parents with major poor health conditions, cancer, and other ailments will be eligible.
In many instances, the application form does not have questions on health. Due to the lack of health requirements, such policies get approval within a few days. It means that your parent’s life policy could be operational immediately.
Important Things You Should Know
There is seven vital information you must be equipped with before purchasing life cover for your elderly parents.
Taking life insurance for elderly parents means that they must agree to take the policy. It protects the insurance company against evil plans someone may have.
There is a lot of foul play that evil intentions may have. It calls first for consent from your parent. The consent will always be in a written contract.
Your parents are the insured. Therefore, their signature on the application form is needed as proof of consent. The idea proves to the insurance firm that the parent is aware of the life policy their child is taking out on their behalf.
2. Insurable Interest
It is not ethical to take life insurance on someone devoid of his or her prior knowledge. It is a safeguard for the insurance carrier.
The law requires that only persons with a financially related concern or legal or blood relatives are the ones to take out an insurance cover on a parent’s life or another person’s life.
If you have a 78 years old parent living off from social security and takes full care of her grandchildren, the good news is she has no big debt and has no savings to cater for her expected medical bills or funeral costs.
If you decide to purchase her a policy of $150,000-$ 200,000(which is considered modest), would show an insurable interest.
The life insurance amount that you need to procure for your parent depends on their:
- Mortgage balance
- The cost of a funeral
- Credit card debt
- Medical expenses and other bills
A 70-year-old parent who has no mortgage balance lives off their pension has a moderate car loan and offers you childcare support will have a policy amounting to $200,000 and more.
A mother who is 76 years old and rents a house, living off on social security and has no debt, but has no final expense savings. You will get her a $50,000 policy to take care of funeral bills and medical expenses.
If your parent has higher mortgage, car and credit card loans and medical bills, if she has no savings but supports you with childcare, you will purchase for her a $500,000 or more policy to cater for her funeral expenses, all debts and childcare costs.
You need to buy an appropriate amount that is suitable to the situation of your parent. Do not purchase too much or too little.
You must show financial justification. The amount of the death benefit cannot be selected randomly. It must be calculated carefully taking into consideration any loans, debt on from credit card, mortgage balance, burial plots, and any unforeseen medical bills.
The insurance companies need a financial justification before approving the coverage amount.
The entity or the person who owns the life insurance policy can change the beneficiary, lower death benefits, and rating, reassign ownership, delete or add riders.
Changes may be made about ownership but not about the insured. The carrier of the life insurance will ask no questions if the owner is the same as the insured.
The insurance company will require evidence of insurable interest if your parents are not the owners of the insurance policy.
The person who will be responsible for paying the premiums is the payer. The payer is the owner of the contract and is the insured. However, if the policy you have purchased is for your dad, you become the payer while your dad becomes the insured.
The person, business, school, church or organization being paid the life policy’s death benefit is the beneficiary. Most of the times, the beneficiaries are the loved ones because they are the ones who will bear the financial weight in case the insured dies.
Commonly, the beneficiary of the life insurance is a child, spouse, school, church, business or organization. The parent should choose a beneficiary to avoid future policy challenges. Expert help is needed to give appropriate guidance.
There are many kinds of life insurance. It is a summary of what we have discussed.
1. None Medical: The applicant does not require a medical examination
- They have high premiums
- You may purchase amounts from $25,000 to $1,000,000 and above.
- The application procedures are company dependent
- Immediate response whether accepted or denied
- The statement from the attending physician(APS)
- Call for paramedical check
- Other carriers demand a health checkup or insist on age limit
- The age limit is usually up to 80 years
2. Term Life-It is an underwritten life cover
- The life insurance is for a certain period, most of the times 10 to 30 years
- Affordable premiums in comparison to others
- Amounts applicable are $$25,000 to $1,000,000 and above
- The paramedical checkup is a must
3. Whole Life (Permanent life Policy)
- It has long-lasting benefits
- Does not require a paramedical exam to be purchased
- The amounts range is about $10,000 – $1,000,000 and above
- The premium charges are costly than Term Life
4. Final Expense. It is the life insurance procured to take care of funeral costs
- It is regarded as a whole life policy and has benefits that do not expire
- The amount of policy is from a minimum of $50,000 and a maximum of $100,000.
- The paramedical test and the approval come later after the health questionnaire is completed
- It mostly covers final expenses and medical costs
5. Guaranteed Universal Life
- It is meant to last for life or a limited chosen by you
- It can continue to age 120 and above
- The amounts accessible are between $25,000 to $1,000,000 and above
- It does not accrue a money value
- Parents purchase it regularly because they use it to leave an inheritance to their loved ones
Purchasing life insurance for parent will give you peace at the end. It is a great investment in the future of your family. When you have the right information that helps you decide on the best plan, you will find that getting an appropriate insurance policy is easy. Knowing empowers you and tranquility of your mind is priceless.
Collaborating with a life insurance agent who represents different insurance companies will help you in getting several quotes. They have your best interest at their hearts, and you are not obligated to a specific insurance carrier. These insurance policies can be tailor-made to suit your requirements.
What you need is to have a chat with an insurance specialist to explain your obligations regarding finances and specific details of the policy. That ensures you get a quality policy at the very competitive race.
In the world today, even though it may not seem like it, life insurance is one of the most significant health policies that most stakeholders would like to admit. The objective of this essay has been to highlight and discuss all there is about insurance and its benefits to everyone in the world today.