When purchasing life insurance, you don't have to purchase the policy on your own life. In some instances, buying life insurance on your parents is beneficial. In cases where your parents can't afford life insurance, but they need to have it for final expenses or some other need, you may be able to purchase the insurance on their lives. Before you can do this, you must establish to the insurance company that you would be directly affected financially by your parents' deaths.
Determine how much life insurance you must purchase. If your parents have many debts or financial obligations that you will be responsible for after their death, then add up all of these debts. Financial obligations may include funeral and burial expenses. The total of these equals the amount of insurance you should buy.
Contact several insurance companies to get quotes. While term insurance is an option, permanent life insurance may be more practical. This is because permanent insurance covers your parents' lives for their entire life instead of for a set period. You won't be able to predict your parents' death. If your parents outlive the term, then you will have to come up with additional savings to pay off their debts. This may place a financial burden on you if you have to pay for their financial obligations on top of meeting your own financial responsibilities. You may wish to purchase a policy on each parent.
Fill out applications for life insurance. You must have your parents' permission to purchase insurance on their lives. To get this, they must sign their names to the application under the application section titled "insured individual." The insured individual is the person being insured under the policy. You will be the policyholder. This mean you own the policy, while your parents are insured.
Submit the application to the insurer. Generally, you must pay the first premium payment with the application. This allows the insurer to issue a temporary insurance binder. The binder provides temporary insurance coverage until the policy is issued.
Coordinate with the insurance company to schedule the health exams for your parents. The insurance company will require normal underwriting to be done on your parents. This means the insurer will need to perform a health exam. The insurance company generally contracts with a 3rd-party paramed professional. The paramed professional is typically a traveling nurse who visits clients in their homes to draw blood and collect urine samples, as well as perform health exams. Once the exams are complete and the application is approved, you will receive the policy contract in the mail.
- "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
- "Life Insurance"; Kenneth Black, Jr., Harold D. Skipper, Jr.; 1994
- "Ernst & Young's Personal Financial Planning Guide, 5th Edition"; Martin Nissenbaum, Barbara J. Raasch, Charles L. Ratner; 2004