Can you insure your parents?
Life insurance can of course protect you as a policyholder and by extension your family, but can you take out life insurance for someone else, such as your parents? In this article we explore how life insurance works when it comes to protecting other people.
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Yes, the short answer is that you can get life insurance for your parents, but only if you have an ‘insurable interest’ in them. This means you would have to prove to an insurer that you would face financial hardship if your parents were to die and you would struggle to meet their financial obligations. Here are some common examples of when this might happen:
- When the costs incurred by parents – such as debt, a mortgage and medical bills – must be repaid by the children.
- When a surviving parent has care costs that must be paid.
- The adult child receives financial support from the parents.
- There is a parent-child business relationship and the death of a parent could cause financial difficulties.
Additionally, the parents must consent before life insurance can be taken out on their behalf. Our application process requires that the person being insured completes the application themselves.
You can’t take out life insurance to insure the life of somebody else without an 'insurable interest'. However, we all automatically have an insurable interest in our own lives. This means that you can take out a life insurance policy on your own life to benefit your parents.
Life insurance is designed to protect your dependants, and that can include parents. Once you've taken out a policy, you can use a trust to choose who receives the cash sum from a successful claim. This could put your mind at rest if you're worried about how your parents would manage without your help. Whether you have concerns about funeral costs, protecting a mortgage or outstanding debts, life insurance policies could help.
How to find the right life insurance for your parents
At some point, your parent or parents might want to discuss their future plans with you, whether it’s discussions about death or what will happen with their finances after they pass away.
While you can’t simply buy life insurance for your parents, you can point them in the direction of various life cover policies to help them decide on the protection they need. Read more about the types of life insurance for senior citizens.
In terms of whether your parents need life insurance, here are some of the key factors to consider:
• Do they have any form of life insurance?
• Have they paid off their mortgage?
• Are there any outstanding debts or loans?
• What assets, including property and savings, do they have?
• Is one parent financially dependent on the other?
Even when a mortgage is paid off or the adult children have ‘flown the nest’, life insurance policies can be invaluable if the policyholder has any financial dependants, which could include siblings or grandchildren, for example.
You might not be able to directly insure your parents on their behalf, but the advantage to having these kinds of conversations is they can make sure everyone knows where things stand, highlight any gaps in planning and provide reassurance for the whole family.