Should I Buy Life Insurance for my Parents?

You can buy life insurance for a parent, but you must have an insurable interest and consent or an insurance company will not accept the application. A small permanent life insurance plan is typically a good option for a parent.

Before choosing life insurance to provide for end-of-life expenses, consider other options, such as a savings account or preneed insurance. Another strategy is for your parent, if they are capable, to buy a policy and name you as a beneficiary.

Can you buy life insurance for a parent?

A company will allow you to purchase life insurance for your parent under two conditions: You, the policy owner, must have consent and an insurable interest in your parent.

There are a few key life insurance terms you'll need to know. You're considered to have an insurable interest in your parent if you would suffer financially from their death. Children often have an insurable interest in their parents. But, depending on the size of the policy, you may need to prove your insurable interest.

The named insured is the person who will be insured on the policy — in this case, your parent. The policy owner is the person who will pay for and own the policy.

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Why would you buy life insurance for a parent?

Buying life insurance for a parent can protect you from unpaid expenses after your parent dies. Such final expenses can include:

How to buy life insurance for a parent

If you're thinking about buying life insurance, begin by having a conversation with your parent. Share your financial reasoning, and get consent to be the owner of the policy. Understanding their needs and what they already have covered will help you decide if life insurance makes sense.

Once you have your parent's consent to buy the life insurance, you can begin getting quotes. The types of policies available will depend on how much coverage you need, the reason for the financial obligation and your parent's age.

For minor financial needs, final expenses insurance is often the best option for older people and elderly parents. These guaranteed whole life plans usually have death benefits that are less than $50,000 and last the entirety of the parent's lifetime. They also do not require a medical exam.

For greater coverage, such as life insurance protection for a mortgage, a robust term life policy would make more sense.

After selecting a life insurance policy, you need to name yourself as a beneficiary and prove that you would experience financial hardship due to your parent dying. If approved, you'll then begin to pay premiums on the life insurance.

Best life insurance for a parent

The best life insurance to buy for a parent depends on their health and age and your financial situation. Generally, a guaranteed universal life insurance policy is great for many — especially a parent who needs lifelong coverage or is uncertain about whether term or permanent life insurance is the better fit.

This form of permanent life insurance has a cash value account that is guaranteed not to go below zero, which could cause the policy to be voided or canceled.

If your parent is relatively young, term life insurance is another good option and may save you money. Term policies are cheaper than permanent policies like guaranteed universal.

Options other than life insurance

Another strategy besides life insurance is to open a savings account for your parent. You could begin to put money aside for end-of-life expenses, which you and their other dependents could also use once your parent has died.

Finally, if you are only worried about funeral costs, you could purchase preneed insurance. This policy lets you prepay for a funeral through the funeral home, making payments easy. But these policies aren't recommended. They provide no flexibility, since the entire death benefit covers only funeral costs.