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Life Insurance For Parents
We have had several calls from children about friends whose parents had no life insurance
and who had to come up with last minute funds to cover basic final expenses or liquidate with major losses some or all of the parent's assets. The story is always the same and so is the realization that had the parent had life insurance, it would have been much easier on the children (and cheaper too). Why do parents wait to get needed life insurance? All we have to do is look within ourselves and most of the answers are their. Procrastination, cost, the unwillingness to consider death as a near possibility or simply a lack of caring.What can children do?
If your parent is cooperative, and it is not always the case, then we suggest a standard life insurance policy with full underwriting. If the need is under $25,000, then a simplified issue final expense or burial policy is probably best. If the parent is not cooperative about getting life insurance, then children may only be able to do a no exam, simplified issue whole life insurance plan. We have had very few situation were the parent does not want to sign for any life insurance. In that case, there is nothing you can do. By the way, It is illegal to take out a life insurance policy on anyone without their permission. For the very difficult parent, you may want to try an online only application. Somehow clicking a few boxes online may not be as much of an issue as signing a form. There are many companies that will take online applications (again, your parent must agree to do this and sign online were required).
Which types plans are best for parents who need life insurance?
When it comes to purchasing life for parents, there really are three basic choices. Term life insurance universal life and whole life. If you will only be covering small final expenses then we recommend that you do a whole life insurance. The whole life insurance should at least be guaranteed to run with level premiums and a level face amount to age 100 (120 is better). If the need is large and also long term, then we recommend a universal life plan. Again, this plan must guarantee that your premiums and face amount will be level to at least age 100. Last, if the need is temporary, such as in the case of a short term loan, then term life is most likely best. As every case can be very varied, a combination of policy types is not unusual. For example, if you need to buy life insurance for your mother or father and they have 10 years remaining on a $50,000 mortgage. Then a 10 year term life to cover the mortgage loan and a small ($10,000 to $20,000) whole life for final expenses and burial cost should be enough.
How about if my Parent has Other Assets to Cover Final Needs?
It may or may not be a good idea to consider using all or some of the liquid and not liquid assets when deciding if your mother or father (or both) need a life insurance policy. Due to the intricate nature of this decision, if your parent has a more complicated estate, we strongly recommend that you speak with an estate planner. In any case, here are some basic guidelines. You should be OK on planning to use very liquid assets to pay for final expenses, debts... You should be very careful with non-liquid assets though. You would not want to have to run a fire sale on their house, or liquidate mutual fund holdings to pay for final expense and other needs. The cost of doing that could be huge!
We hope that this short article will help you make better decisions. As we say in all of our articles always ask, ask and ask more questions. Feel free to ask us too. Be well.
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