How to Take Out a Life Insurance Policy on a Parent

Make sure your parents are covered with life insurance.

If your parents die without life insurance, you will need to pay for funeral costs out of pocket. This could cause you and your family financial hardship. However, you can avoid having to go through this by purchasing life insurance on your parents while they are still in good health. This will ensure that, even if they do not buy life insurance, that they are covered and that their financial obligations will be paid for when they die. Generally, insurance companies are very careful and restrictive about allowing you to purchase life insurance on people other than yourself and your spouse. However, many insurance companies will allow you to purchase life insurance on your parents if you provide a proper explanation of what the intended use of the benefits will be. The insurance company is looking for an "insurable interest," which means a personal interest in the person you are insuring.

Instructions

1. Contact your parents. You will need your parent's consent to purchase life insurance on them. They will need to go through underwriting and answer medical questions on the application for life insurance.

2. Contact the life insurance company or the life insurance broker you plan to use. Your life insurance broker will be able to give you the proper application for life insurance. You will need to have your parents with you when filling out the life insurance application with the life insurance agent, or if you are filling the application out online or over the phone with an insurance company representative, they must be there with you to answer medical questions. Make sure that when you are filling out the application, you name a beneficiary. Generally, this will be you if you are taking out a policy to pay for your parent's financial responsibilities after their deaths.

3. Submit the application and pay the first premium payment. You will receive an insurance binder. This is a piece of paper that will provide temporary insurance coverage until the policy is issued.

References

• "Life & Health Insurance, License Exam Manual, 6th Edition"; Dearborn Financial; 2004
• "Ernst & Young's Personal Financial Planning Guide, 5th edition"; Martin Nissenbaum, Barbara J. Raasch, Charles L. Ratner; 2004
• "Practicing Financial Planning for Professionals, practitioner's 10th edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007