Is Buying Life Insurance For Senior Parents Worth It?

A life insurance policy for an aging parent may be a worthy investment if their children will face financial difficulties as a result of their death

Death is uncomfortable to think about and even more uncomfortable to have a conversation about. Though, as parents age, death and after-death wishes become conversations that are difficult to avoid. Having these conversations with senior or aging parents is absolutely crucial to understanding how to honor and financially afford their end-of-life requests. As these conversations come up, many children of senior parents consider getting a life insurance policy for their parents to make sure they will not be faced with financial difficulties after a parent passes away. Let’s take a look at how a life insurance policy may help families after a senior parent’s passing and which types of policies may work best.

Can You Get Life Insurance for Your Parents?

Getting life insurance for your parents is possible—as long as you have their approval

Many people considering getting life insurance for their parents wonder if it’s even possible in the first place. While it is possible to get a life insurance policy for a parent, it has to be done with their consent. While it can be an uncomfortable topic to broach, insurance company providers will require the policyholder’s signature, so it's imperative that they approve of taking out a life insurance policy.

On top of the consent, something called insurable interest must be proved. In simplest terms, insurable interest means that when the policyholder dies, the main beneficiary would be financially impacted. As a child of the policyholder, insurable interest is automatically proven.

Common Reasons To Buy Life Insurance For Aging Parents

Life insurance policies for aging parents can help alleviate the financial obligations of their surviving family members

No matter who a life insurance policy is for, the ultimate goal is to provide the policyholder’s beneficiaries with some financial support after their death. For children with aging parents, a life insurance policy can not only help cover funeral costs but also help support surviving parents.

Covering Funeral Costs

When planning for their arrangements after death, most people want a funeral of some kind. Depending on the wishes of that person, a funeral could entail viewing services, casket costs, cemetery plots and markers, and much more. Even with wishes on the more basic side of arrangements, the cost of a funeral is expensive—averaging around $7,000 in the United States. Now, if a parent does not have money set aside for funeral arrangements after their death, that can put their surviving family members in a financial hardship. A payout from a life insurance policy can help families cover the cost of final arrangements.

Paying Lingering Medical Bills

While an aging parent could be in great health at the time when considering a life insurance policy, that can all change suddenly. If their health declines, medical bills can unexpectedly pile up—from medicine costs, hospice care, medical treatments, and whatever other medical care they may need. Without some type of savings set aside, the responsibility of paying medical bills and debt falls onto surviving family members. If it would be difficult for those family members to afford those outstanding debts, life insurance death benefits can help them pay down those medical expenses.

Supporting a Surviving Parent

Let’s say a couple depends on one person’s pension in order to afford their expenses in retirement. If the person with the pension passes away prior to the dependent partner, that can put a huge financial burden on not only the surviving spouse but also their children. Whether the family needs to move the surviving parent into assisted living or move them into their own home, that is a large financial undertaking. Getting a life insurance policy ahead of time can help financially support the surviving parent with their cost of living or help their children adjust to the financial adjustments of caring for their parent.

Leaving an Inheritance

Many parents want to leave their children or even grandchildren with some type of financial inheritance after they pass away. During their life, they may not have been able to save up to leave their family anything substantial or potentially had to spend what they had saved on other financial obligations. Whether that’s a contribution to a college fund or a chunk of change to help with a downpayment on a house, a life insurance payout can provide a parent’s loved ones with some type of inheritance for their loved ones.

How Much Coverage Should My Parent Have?

The amount of coverage your parent needs depends on their current financial situation and their end-of-life wishes

The amount of life insurance coverage someone needs will always vary from situation to situation. While some people may only want a policy to help cover funeral expenses, others may need a more sizable policy to financially support their surviving family members.

When considering coverage amounts, it’s best to consider how much debt they have in comparison to their assets or savings. Talk about their wishes for their funeral services to estimate how much it may cost and factor in how that will be paid for. During this time, it is also best to determine who will be paying for the premium and how much that person can realistically afford on a monthly basis. With all of this information in mind, it will be much easier to determine how much coverage is needed.

Traditional vs. No Medical Exam Life Insurance: Which Is Best?

The type of life insurance that’s best for you will depend on your parent’s age and health

When it comes time to pick a policy type, there will be quite a few options available. To narrow down the decision, it’s best to determine whether to go with the traditional policies or to opt for an insurance option with no medical exam. That decision will ultimately boil down to the parent’s age and their health.

Younger parents in good health will likely get the best rates if they opt for a traditional life insurance policy. In this route, they will have to undergo a medical exam and answer quite a few questions about their health history and their lifestyle. Traditional life insurance policies are typically best for parents who haven’t quite reached retirement age and may not need their children to get a policy for them.

Older parents may have an easier time finding a policy through life insurance options that do not require a medical exam. If their health is poor, there are policy types that do not require them to disclose any health information. Older parents in relatively good health can find sizable coverage options after disclosing some of their health details.

The bottom line? Life insurance policies that do not require a medical exam typically bode well for senior or aging parents.

Best No Medical Exam Life Insurance Options

Breaking down the most common no medical life insurance options for aging parents

Even after narrowing down the options to no medical exam life insurance policies, there are still quite a few options to pick from. Again, what will work best for a parent in this situation will boil down to their age and their health. Let’s explore some of the best life insurance options for aging parents.

Accelerated Term Life Insurance

Term life insurance is a type of policy that guarantees a death benefit over a certain period of coverage—most commonly 10, 15, 20, or 30 years. In some cases, a term life insurance policy may require a medical exam. However, more and more life insurance providers are adopting accelerated term life insurance options, which do not require a medical exam. Depending on the health, age, and financial goals of an aging parent, an accelerated term life insurance policy may be the best way to get life insurance without a medical exam.

During the application process for an accelerated term life insurance policy, the applicant will be asked detailed questions about their age, their health, their occupation, their lifestyle, and other necessary questions. Using this information, the life insurance carrier will use this information to determine coverage and premium amounts if the applicant is eligible for the policy. Should the applicant be approved, a term life insurance policy can be written and approved relatively quickly. This type of no medical exam life insurance policy tends to work best for parents who are still relatively young and are in good health. Unfortunately, those who are older and have some health issues may not qualify for this type of insurance. Keep in mind, too, that there may even be an age limit on who can apply for this type of insurance.

Simplified Life Insurance

Simplified life insurance is a type of no medical exam policy that only asks a few medical questions during the application process. Simplified life insurance is best if a parent needs life insurance quickly without a waiting period. In general, someone who applies for this type of life insurance policy can have coverage within just a few days. This is possible because the application process is, well, simple. Because medical exams are not considered during the application process, the death benefit may be a bit lower—ranging from as little as $5,000 to as much as $100,000—with a higher premium. Depending on the life insurance company, simplified life insurance can be offered as term or permanent life insurance policy, so policyholders have some flexibility in their coverage options. This type of insurance can be good for parents who have health issues that may disqualify them from a traditional insurance policy.

Guaranteed Life Insurance

Guaranteed life insurance not only does not require a medical exam but also does not require an applicant to submit any information about their health history. The downside of this type of insurance is that there is a pretty significant waiting period—typically between 2-3 years. If the policyholder were to pass away before that waiting period is over, the beneficiaries would not receive any type of payout from the death benefit. With this being said, the insurance company would pay back any premium payments made during that time with a certain percentage of interest added. The death benefit for this type of insurance tends to be in the lower range— between $2,000-$25,000—and premiums tend to be fairly high for this type of life insurance as well. Considering all of this, this type of insurance is really only best for people who have serious medical conditions that would prevent them from qualifying for any other type of insurance.

Final Life Expense Insurance

Final life insurance, which is also commonly referred to as burial insurance, is intended to cover end-of-life expenses. While applicants do typically need to be within a certain age range in order to qualify for this type of insurance, it is fairly easy for older adults to qualify for this type of life insurance because there are different types of burial insurance options that require different information during the application process. Coverage can range from $5,000 to $35,000 and can be used to cover funeral arrangements, medical bills, and any other outstanding debts.

As senior parents age, it’s important to start having conversations about their financial situation and their after-death wishes to understand how everything will be afforded. This is especially true for children who are considering a life insurance policy for their parents to help offload some of the financial obligations that will come after their parent’s passing. For those concerned about their financial responsibilities for their aging parents, a life insurance policy may be a worthy investment.