How to buy life insurance for your parents
A handy guide to buying life insurance for your parents.
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Buying life insurance for your parents can provide peace of mind and financial security for both you and your folks. So long as you follow the proper steps, you should have no bother taking out a policy on their behalf.
Can I buy life insurance for my parents?
Yes, but there are a couple of things that you'll need to do.
- Get their consent. You can't buy life insurance for anyone without their knowledge; that includes your parents. You'll need to get their written consent when you buy a policy for them.
- Prove that you have an "insurable interest". To be able to get life insurance for your parents, you need to be able to show that their death would cause you to suffer financially. In other words, you need to show that there are debts and expenses you'd need to pay if they died.
How to buy a life insurance policy for your parents
Follow these steps when buying a life insurance policy for your parents.
- Calculate how much money you will need. You need to work out how much you'll need to pay off all their debts. This means you'll need to add up their debts, including any mortgages and loans, plus find out their assets and savings. You can use our life insurance calculator to help you get started.
- Choose between term and whole life insurance. Term lasts a set period of time and so is almost always cheaper, while whole life insurance provides lifelong coverage. If you want to guarantee that their debts will be cleared by a policy, then whole life insurance may be a better option in this situation.
- Shop around. This is the part we've made simple. You can compare life insurance policies for seniors side by side here to get a clear sense of how brands stack up against one another.
- Select the beneficiaries. This is the person or persons who receive the payout. You need to get your parents' final say on the beneficiaries, though presumably it will be you.
- Apply. Once you've figured out all the above details, you can apply for a life insurance policy on your parents' behalf. Be sure to submit everything that the insurer asks for.
Can I still buy a policy for my parents if they're in poor health?
Yes, but it can make things a little trickier. If they're in poor health, some insurers will refuse to cover them, so you may need to get life insurance through a provider that specialises in high-risk individuals.
If you're eager to get cover then look at guaranteed insurance, which doesn't require any medical questions. Be warned though, it can be very expensive when compared to other policies.
Medical conditions that can make it difficult, but not impossible, to get life insurance include:
- Kidney or liver disease
- Heart attacks
- Sleep apnea
- High blood pressure and high cholesterol
Why consider taking out a life insurance policy for your parents?
There are lots of reasons why you should seriously consider taking out a life insurance policy for your folks. Here are just a few:
- Debt. Any debt that your parents have will be passed on to you when they die. This includes everything from car loan payments to credit card bills.
- Provides you and your parents with peace of mind. Your parents don't want to leave you with any financial burdens when they pass away, and you don't want to deal with it either. Life insurance provides peace of mind knowing that finances are the last thing you'll have to think about when the day comes.
- Paying for the funeral. Funerals can cost anywhere from around $4,000 to over $15,000 in Australia which is not cheap. A policy for your parents can cover that as an add on, so keep an eye out for it when you're shopping around.
- Inheritance. All parents want to give their kids a better life than they had. A life insurance policy is a nice way for them to ensure that they leave you with something.
Are there any exclusions I need to be aware of?
There are general exclusions, which apply to all policies, and there are also often specific exclusions that apply to individual policies.
General exclusions include:
- Suicide and self-harm are not covered within the first 13 months of coverage.
- Criminal activity, for example, any injuries or death which occur during you doing anything illegal.
- Recklessness, negligence and unreasonable behaviour. For example, unsafe driving, failure to take proper safety precautions or not seeking medical attention for a clear health issue.
Specific exclusions can include:
- No cover for pre-existing conditions. This can include ongoing health conditions, such as diabetes, or an illness which might recur, like cancer. In some cases, this condition may be specifically excluded from cover.
Losing your parents is tough no matter how old you are. Being burdened with debts, loans and expenses is something you can do without. Luckily, you can take care of the financial side of things by buying life insurance for your parents.
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Frequently asked questions
Who should be the beneficiary of the policy?
This is something you and the rest of your family need to decide. Make sure you discuss it with your parents and come to an amicable agreement.
Can I take out a life insurance policy for someone I'm not related to?
Yes, but similar to parents, you'll need to get their consent and establish "insurable interest".
Can I take out funeral insurance for my parents?
Yes, you can take out funeral insurance for your parents, so long as you have their consent and can prove that you have "insurable interest". Funeral insurance can sometimes be your best option if you can no longer find an affordable life insurance policy because of a serious illness or pre-existing medical conditions.
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