Life Insurance for Parents: Start Planning Now

If you’re here, then you’re likely considering buying life insurance for your parents. Let’s face it: no one wants to imagine the time and difficulty of your parents’ eventual passing.

Nonetheless, it’s very important to familiarize yourself with the dos and don’ts of purchasing life insurance. With that said, this guide will provide you with all of the information you need to begin the process of securing life insurance for your loved ones.

Select the Right Final Expense Life Insurance Policy for Your Parents

Many first-time life insurance buyers struggle with selecting the right policy. Why? Buying life insurance can be tricky and oftentimes people are being sold inadequate policies that won’t really help them in the long run.

Let’s explain this further. There are two popular types of life insurance: permanent whole life insurance and term life insurance.

Permanent whole life insurance lasts forever, but the result is steeper monthly payments. Conversely, term life insurance will eventually expire, but it’s generally more affordable for many families.

Which one is best for you? It depends on your situation. If you want to cover any end of life expenses (medical bills, funeral costs, etc) or if you plan to go through the estate planning process, permanent life insurance is your best choice simply because it will never expire and can meet those needs.

On the other hand, if you have temporary debts that will end one day, like a mortgage or car note, term life insurance is a very sufficient option. It’s best to speak to an independent agent (this will be discussed further below) to assess your situation and determine which option is suitable for you.

Avoid Taxes on Your Death Benefit

If you’re familiar with how life insurance works, then you’ll understand that there are three parties that entail a standard policy.

These parties are:

  • Carrier – The person the life insurance is for.
  • Owner – The person making the monthly payments.
  • Beneficiary – The person awarded the death benefit

If you don’t carefully outline the details of your life insurance policy, you could be subjected to unnecessary taxes. Therefore, it’s essential to ensure that two of the parties above are occupied by the same person.

This is because the IRS will treat the death benefit as a taxable donation to the beneficiary if all three parties are different people.

Why?

The IRS will look at the amount given to the beneficiary in the same way as the owner paying the beneficiary out-of-pocket. With that said, make sure that the owner and beneficiary are the same person to avoid paying taxes.

Hire an Independent Agent

It’s impossible for a single life insurance company to be your best option. For one, there are far too many life insurance companies. Next, these companies all have their preferences on who they’ll accept for whatever reason.

By hiring an independent agent, you’ll receive assistance from a professional who will present you with a variety of your best options.

Unlike captive agents who work primarily with one insurer, independent agents provide a broad range of options for you, despite any health conditions your parents may have.

Gather as Much Health Information as You Can

One of the worst things you can go through is applying for life insurance and getting flat-out rejected because of a health concern.

To avoid this, you should gather as much health information on your parents as you can. This information should ideally be based in the past and present (hospitalizations, heart attacks, diabetes), include any high-risk activities (skydiving, racing, etc), and state any escapable details like your parents’ driving history.

The more details you can extract from your parents’ medical history, the better chance you can be aware of your opportunities of receiving the right coverage.

You Don’t Have to Be Mindful Where You Live

Back in the day, if you wanted to buy life insurance you and your parents had to meet at the physical location of the insurer.

Times have certainly changed, and you can now remotely purchase life insurance by using an email or voice signature. This has made purchasing life insurance simpler and less of a headache to work around your schedule.

Don’t Worry About Your Budget

You may have a general idea of what you want to spend on life insurance for your parents. However, can you afford it? The bottom line is – if you cannot comfortably afford a policy, don’t buy it.

This may lead you with smaller coverage, but that in itself is better than no coverage at all. If you were to take on an expensive life insurance policy and a financial disaster happens down the load, it’s likely that the first thing you’ll cancel if the life insurance.

For this reason, don’t bite off more than you can chew. Buy the life insurance you can afford – plain and simple.

Stay Away from Guaranteed Life Insurance Policies

A guaranteed life insurance policy is eligible for just about anyone despite any medical conditions. Of course, there is a tremendous downside to buying this type of insurance.

  • There is a two-year waiting period for guaranteed life insurance. In this time anything can happen, so it’s not ideal to begin paying for a policy that’s not effective immediately.
  • Guaranteed life insurance policies are expensive than traditional insurance. Since these policies have no requirements, companies must charge you more to cover the risk. It makes absolutely no sense to pay top-dollar for an insurance policy that’s only effective after two years.

As you can see, guaranteed life insurance isn’t particularly valuable for most scenarios. Unless it’s absolutely necessary, it’s best to avoid it.

Start Planning Today!

Buying life insurance for your parents is a big deal, so it’s a great idea that you decided to read this article. If you want to receive the best deal for life insurance, it would be best to follow all of the tips above.

Doing so will help you navigate the complicated road of securing necessary coverage for your loved ones and give you peace of mind.

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