Even if you're an adult, the death of a parent can represent a significant financial burden. Even self-sufficient adult children might find themselves on the hook for their parent's debts, for funeral expenses, and looking for ways to make up for productivity they lost while grieving. Despite the fact that it means a difficult conversation, taking out life insurance on a parent can be a valuable financial decision.
Talk with your parent about your intent to take out life insurance. According to "Life Insurance and its Applications," some states require consent before a child can take out a policy on a parent. Even if it's not required by law, the entire process will go more smoothly with your parent's knowledge and support.
Work with your parent to gather the information you'll need to apply for a policy. This includes basic contact information, Social Security number, driver's license number, contact information for doctors and a general medical history.
Go over your finances and your parent's finances to determine how much you need to take out. If your parents have a lot of debt, you should get a policy that covers the debt. If not, insurance executive Courtney Rogers recommends a policy at around twice what you expect to spend on a funeral. This will cover funeral costs well into the future, with money left over to help family with related expenses.
Decide between term insurance and whole life insurance. Term insurance covers your parent for a set period, while whole life insurance provides a benefit for his entire life. Financial guru Dave Ramsey recommends term insurance because it is less expensive. However, term insurance becomes significantly more expensive as the insured ages. An older parent may find that whole life is less expensive, especially if he is older than 60 or has medical problems.
Meet with your insurance agent and your parent's insurance agent. In either case, you will qualify for multiple policy discounts, a standard insurance agency practice. Shop between the two agents to find the best deal, possibly bidding them against each other.
Bring documents to your parent that require his signature. For example, most medical information release forms will require him to sign, even if you're paying for and taking full responsibility over the policy.
- Courtney Rogers; insurance executive; American Income Life, Richmond, Virginia
- "Life Insurance and Its Applications"; Irena Kerr; 2001
- "Exam Cram: Life and Health"; Bisys Education; 2005
- "Total Money Makeover"; Dave Ramsey; 2007