A Life Insurance for Parents
Evaluating your parent's financial situation and future is a tough discussion. Unfortunately, your parents are not getting any younger. Life insurance is one of the topics that belong in this difficult discussion.
Did you know that 62 percent of Canadians with parents over the age of 65 have not discussed financial management?
This is a mistake as paying for end-of-life medical care and funeral services can be a financial burden. Read on to learn more about life insurance for parents. In addition, explore whether life insurance for parents is a worthwhile investment.
1. Can Your Parents Be a Financial Burden?
We all want to be there for our parents as their health deteriorates and they pass away. While your parents' well-being is the most important factor, you also have to consider your family's financial health.
How will you pay for it if your parents require long-term health care? What if you have to take an extended leave from work to care for your mother or father?
Another financial consideration is estate planning. There are considerable costs involved with settling an estate and paying taxes to the government. Depending on your parents' financial situation, there may be outstanding debts to settle as well.
Lastly, there is the funeral to consider. Funeral services are expensive and raising the money after a death is an inconvenience during an emotional time.
2. What Is the Solution?
Life insurance provides a safety net to help cover the considerable costs for end-of-life health care and estate planning.
For many families, the solution is to purchase life insurance for parents.
There is a wide array of life insurance amounts to cover each family's specific needs. Perhaps one family's parents have a lot of outstanding debt to settle. This family may decide to take out a large policy to cover the significant expenses incurred.
On the other hand, another family may have parents with a great health insurance plan and little debt. This family may decide to choose a policy that merely covers the funeral expenses.
3. How Do You Apply for Life Insurance for Parents?
The first thing you need to do is obtain consent from your parents.
You may wonder why you need to obtain consent if you are solely responsible for managing your parents' finances and health. The unfortunate truth is that some people have abused the life insurance process for financial gain. The bottom line is that your parents must be aware of and provide concurrence for the life insurance policy you seek.
Some life insurance providers require that the policyholder have an insurable interest. In layman's terms, this means the survival of your parents is your main concern.
It also means that you will suffer financial hardship or loss in the event of your parents' death. Given all the potential costs, insurable interest is not a difficult thing to prove. The funeral services alone could cost tens of thousands of dollars and not many families have that type of money lying around.
4. Who Is the Beneficiary?
The most common answer is that the policy subject's children are the beneficiary. However, your parents may designate additional beneficiaries.
Other common beneficiaries on a life insurance policy are the spouse or grandchildren. However, some people do make less common designations. These may include a church, school, or organization that is important to them.
There are some special considerations to make when designating beneficiaries. For starters, life insurance for parents should correlate to the subjects' will. If there is a conflict between the two, it may cause legal issues following your parent's death.
In addition, considerations are necessary if the designated beneficiaries are minors. If this is the case, the life insurance proceeds cannot be given directly to them. Perhaps the funds are put in a college savings fund or an investment made in government bonds that mature when the minor becomes an adult.
What Are the Different Types of Life Insurance?
The next step is finding the best life insurance for parents.
There are at least 4 common types of parental life insurance: Term Life Insurance, Final Expenses, Whole Life Insurance and Simplified Issue.
Many consumers have heard of term life insurance policies. They are unique in the sense that the life insurance is offered over a specific time period.
You are likely looking at a 10-year term on a policy for parents. Term life insurance for parents requires a medical exam before an application is approved. The major benefit of term life insurance is that coverage can range up to one million dollars.
Another option is a life insurance policy called final expenses. This policy is for those interested in covering funeral expenses and medical bills.
A comprehensive medical exam is not required and approval is quick. Because this type of policy is for expenses only, coverage amounts are much smaller and only range up to $100,000.
The third option is called whole life insurance. The benefits are similar to term life, however, benefits do not expire and the policy accumulates a cash value. The drawback to this policy is that premium rates are much higher than term life.
The final option is called simplified issue. Policy amounts go as high as half a million dollars and no medical exam is required.
Premium rates are comparable with term life insurance policies. The drawback here is that there are age limits and many plans end coverage at 80 years and older. This may not be a viable option if you are seeking coverage for your parents.
Wrapping It Up
Life insurance for parents is a worthwhile investment regardless of how much coverage you need.
Instead of raising the money at the last minute, life insurance allows you to make affordable monthly payments. These payments accumulate to large coverage amounts that can cover funeral services and medical bills. In addition, larger policies can settle your parents' debt obligations.
Your parents deserve to ride off into the sunset with the most favorable conditions. This is possible with proper financial planning and a great life insurance policy to help cover expenses. If you need life insurance for parents, please contact us for assistance.