It can be an uncomfortable thing to think about and an even tricker conversation to have, but an important one. The question is, can you buy life insurance for your aging loved ones?
The reality, and how life insurance helps
Sad as it might be to admit, everyone is getting older, and no one will live forever. Thinking about the practical and financial implications of a person’s death is not callous or morbid, but it is sensible. Even in old age, people may be carrying debt, end-of-life care can be very costly, and so can funerals.
By ensuring you have adequate life insurance in place, many of these financial burdens can easily be taken care of. Life insurance is insurance that pays out in event of death or terminal illness so long as premiums are maintained.
Most commonly, people buy life insurance for themselves to make sure everything is taken care of when their time comes. In some circumstances, however, you might want to consider purchasing insurance on behalf of someone else.
Elderly relatives, for instance, may let policies lapse, decide against them, or struggle too much with the administration involved. In these circumstances, it might seem prudent to take out life insurance on their behalf.
Can you buy life insurance for your elderly relatives?
The simple answer is – in many situations – yes, but there are some requirements to meet. Reputable insurers will sell third-party life insurance so long as certain criteria are satisfied.
Perhaps the more appropriate question would be: Should I get life insurance for my elderly relatives? To answer this, there are several factors to consider.
First of all, will the death of the person for whom you are buying insurance impact you financially?
Unless the answer to this is “yes,” it is unlikely you need insurance or will be permitted to have it. The law states a buyer must show “insurable interest,” which means demonstrating the insured person’s death will hurt them financially.
There are several ways in which the death of an elderly relative can impact your finances. The most obvious are funeral costs or outstanding payments required to be settled on mortgages or loans.
If a parent dies, you might become responsible for the costs of relocating or caring for their spouse or other dependents. Alternatively, you may have been relying on the deceased person for your own financial support.
If any of these circumstances, or similar, are true, you are likely eligible to buy third-party insurance for your loved ones. If they are absent, you may be declined in order to prevent insurance from being bought with malicious intent.
Secondly, are you attempting to purchase insurance for a reasonable policy amount?
This goes hand in hand with the “insurable interest” requirement in that you should insure for only an appropriate amount. The amount of any policy taken on behalf of another should be similar to the costs their death will generate.
Thirdly, do you have consent?
This one can be tricky. But, in almost all situations, you must have permission from any person you wish to insure.
Why? This is both for ethical reasons and because the insurance provider will likely require a medical to determine their premiums.
The conversation you need to have to gain this consent can be difficult for many reasons. If navigated sensitively and openly, however, it should leave both parties in a clearer position and could alleviate significant worries.
Considering the questions and situations outlined above should help you decide whether buying life insurance for a relative is desirable. The next thing you must consider is the different types of life insurance and which would be best.
What kind of life insurance should I buy for my elderly relatives?
In general, there are two main types of life insurance:
1. Whole of life insurance
These plans guarantee to pay out a specified cash amount on a person’s death, whenever that may be. Premiums for this are usually higher and paid continually until the date of death or a predetermined age, usually 90.
These generally come in two forms, guaranteed over 50’s policies, which do not require medicals, and regular ones, which do. The first usually requires a waiting period, while the second is valid immediately and is likely to offer higher payouts.
2. Term life insurance
With these, premiums are generally lower, but payouts are only provided if the insured person dies before a specified date. Should they live beyond the agreed term, premiums will be non-refundable, and a new policy will need to be taken.
These policies can be tailored much more to fit the policyholder’s specific requirements. For example, if the insurance is to cover a mortgage, the payout might decrease each year to match the debt.
Comparing the two options
At first glance, the most simple option seems to be whole life insurance, offering a guaranteed payout with minimal criteria. Premiums for this, however, can be much higher, especially if a medical must be passed to qualify.
Term life insurance, on the other hand, may look complex but is much more affordable and comes with far fewer requirements. The chances of being rejected for term life insurance quotes are much lower than for a whole of life policy.
Takeaway on buying life insurance for elderly loved ones
So, to answer the question, “Can you buy life insurance for your elderly relatives?” the answer is yes, absolutely. If it’s something you’re considering, a quality provider will always be happy to talk you through the details.
It may seem a difficult topic at first, but, like everything important, it will be worth doing so.