How to buy life insurance for your parents

Losing a parent can be an incredibly distressing time, and the last thing you want to think about is money. However, insurance could help you cover their debts or medical expenses that you may otherwise be left trying to pay off.

In this guide, we explain the situations when you can buy life insurance for a parent as well as offer advice on which life insurance policy you should go for.

Can you actually buy life insurance for your parents?

You can in fact buy life insurance for your parents. Taking out a policy for your mum or dad is like getting life insurance for yourself, although you do need insurable interest.

What is insurable interest?

You have an insurable interest in someone if you would stand to suffer a financial loss or hardship when that person dies.

When it comes to taking out insurance for your parents, you would have insurable interest if you will need to pay off their debt, their mortgage, their care and medical bills or their funeral costs after they die.

The point of insurable interest is to stop people from trying to cash in on insurance policies if they expect people to die soon. You’ll also need your parents’ consent if you want to take out an insurance deal on their behalf.

How to buy a life insurance policy for your parents

Taking out life insurance for your parents is just like shopping for coverage for yourself. However, when working out which insurer and which policy you should go for, here are a few keys steps to consider:

• Consent. First, make sure your parents are fine with you taking out life insurance on their behalf. You won’t be able to take out a policy without their permission.
• Iron out the details. You will need to get your parents’ medical information and other basic details. Also, make sure your parents haven’t already taken out life insurance in the past that might still be active.
• Insurable interest. After getting consent, you need to prove insurable interest to the insurer by explaining why you will experience financial loss when your parent dies.
• Level of cover. Based on your and your parents’ financial situation, determine how much protection you’ll need. Will you be able to pay off any debts and funeral costs for instance? It might be worth consulting with a financial adviser about this.
• Type. There are two main types of life insurance: term and whole life. Work out whether you want to pay less on premiums or get the maximum level of cover possible.

Can I still buy a policy for my parents if they are not in good health?

In short, yes. As with taking out insurance for yourself, factors such as age and health play a major part in determining whether you can get coverage for your parent.

Some insurers will refuse or will bump up the costs; however, you can still buy life insurance for a parent who is of ill health. You might just have to go to an insurer that specialises in pre-existing conditions, and you could have to pay more.

Why consider taking out a life insurance policy for your parents?

There are several reasons why you might take out a life insurance policy for your parents.

• Funeral expenses. It might be shocking to some, but funerals are expensive. Fees can run into the thousands of pounds, so you might want a life insurance policy that can help ensure you aren’t left severely out of pocket should a parent die.
• Health care. If your parent uses private health care, medical costs can start to escalate. Life insurance can help pay off any outstanding bills.
• Debt. If your parents have any outstanding debt, such as a mortgage or credit card bills, you might be held financially responsible. Life insurance can aid you in paying off these leftover debts.
• Expenses. If you, your spouse or other dependents rely on your parents for income, life insurance might be a good idea. Although you will have to prove “insurable interest”.
• Tax. With the right arrangements, life insurance could help your parents leave behind more money without it being hit by inheritance tax.

What type of life insurance policy should I take out for my parents?

Working out which type of life insurance to get for yourself can be confusing, let alone for someone else. You’ll need to think about term length, coverage amounts and add-ons as well as other policy features. First though, you’ll have to decide between these two different types of life insurance policies:

Term life insurance

Term life insurance is the most affordable type of life insurance. As the name suggests, you take out coverage for a set term of between 10 and 30 years.

If your parent should die during this period, then the policy will pay out. If your parent doesn’t die within this period, the policy expires and the insurer doesn’t owe you anything. Here are some key features:

• Level term. This is one type of term life insurance you can get. With this, you pay the same in premiums throughout the deal, and the payout stays the same too.
• Decreasing term. With this type of term life insurance, you pay the same premium throughout but the payout decreases over time. These deals are generally cheaper and better suited to someone who is worried about leaving behind a large debt, such as a mortgage.
• Lasting low rates. Take out term life insurance when you’re young and healthy and you can lock in lower rates for decades to come.
• Most affordable option. Term life policies are cheaper than whole life policies as there’s the chance the insurer won’t have to pay anything out. Of course, you won’t have to continue paying premiums if you outlive your term.

Whole life insurance

Whole life insurance is a type of policy that will pay out a lump sum when your parents die, regardless of when that is. Generally, it is more expensive than term life insurance as the insurer knows it will definitely have to pay at some point. Here are some other key features.

• Non-profit insurance. With this type of whole life insurance, you pay a set premium over the course of your parent’s life. When the policy ends, you’ll receive a fixed lump sum of cash.
• With-profit. You can also get a with-profit whole life insurance policy. With this, you pay a premium that the insurer then put towards an investment fund. The payout is tied to the performance of the investments.
• Don’t pay premiums forever. With this policy, you typically will pay premiums up to a certain point, typically when your parents turn 90.
• Tax-free payment. One major benefit is you could receive the life insurance tax-free if you make the proper arrangements.

Bottom line

It certainly is possible to buy life insurance for your parents. The process is pretty similar to taking out life insurance for yourself. However, you’ll have to get your parents’ consent and details.

It’s probably a good idea to speak with a financial adviser and your provider before committing to a policy, and as always compare, compare, compare. Don’t jump for the first deal you see or you’ll end up paying over the odds.

Frequently asked questions

• Can I take out a life insurance policy on someone I'm not related to?

  Yes, although you’ll need their permission and you’ll need to prove insurable interest. In other words, you’ll need to prove that their death or injury would lead to financial loss to you.

• Can I get no-medical-exam life insurance for my parents?

  It depends. The insurer will look at your answers about your parents’ health, lifestyle and previous medical history. They may decide they can give a quote simply by having a chat with their doctor, or they could ask them to undergo a medical exam. Ultimately, it will depend on the insurer and the factors described above.