Firstly, here’s a fact – not everyone finds the need to purchase life insurance on their parents. It is merely an extension of the situation you are in, and up to you to decide. Sometimes a life insurance policy on your parents isn’t what they require at the time.
However, for all those people that do want or need to purchase one, this article will list 10 tips that will help you get the best deal possible!
1. Your parents health: gather as much information as possible!
Your parent’s health history is perhaps, the single most influential factor that determines which companies will accept them, exactly what the price will be, and ultimately which one is best for them.
For that reason, try your best to become as familiar as you can regarding their health before you begin talking to agents, and obtain as much information as possible.
Any good, independent agent will gather as much information on their health as possible, and then proceed to try to find you the best plan.
If you’re not well informed on the subject of your parent’s health, no agent can really help you. Yes, you can still get quotes, but they will not be an accurate representation of the actual figure.
You should try and obtain the following:
- Past & present prescription medications (the more you can get the better)
- Past & present diagnosed conditions such as high blood pressure, COPD, CHF, diabetes etc (find out when they were diagnosed)
- Prior major events such as heart attacks, strokes, hospitalizations, cancer, etc. (find out when they occurred)
- Height and weight
- Tobacco and alcohol usage
- Any high-risk habits such as sky diving, rocking climbing etc.
- Details on any driving violations within the last 5 years
However, if can’t access all that information, there’s no need to worry! As long as you still have a list of their medications, the company can draw a pretty good picture of any health issues they are currently facing or have had in the past, and provide you with the quotes you need.
- Avoid tax consequences through this method!
A life insurance policy has three vital pulses that you need to take into account when looking for one:
- The Insured: The individual whose life the policy is being insured.
- The Owner: The individual who pays the premiums and has control of the policy.
- The Beneficiary: The individual designated to receive the death benefit upon the passing of the insured.
To avoid a potential tax bill, you must ensure that two of the three points are the same person.
Otherwise, a tax will be imposed.
We understand that this may get confusing, so here is an illustrative example:
Suppose Adam wants to purchase coverage for his mother, Linda, and he names his son Steve as the beneficiary. The breakdown would be as follows:
- Insured= Linda
- Owner= Adam
- Beneficiary= Steve
Upon the passing of Mary, Steve will receive the proceeds of the policy since he is the beneficiary. It will be viewed as a gift to Steve since Adam was the owner of the policy.
In the eyes of the IRS, they look at that as no different than if Adam had just given Steve a personal check for $20,000.
So this what you need to be wary of! If you are buying life insurance for your parents, you need to name yourself the beneficiary as well as the owner! Or you will be taxed.
There are other things that will also aid you when it comes to evading tax.
First, the IRS allows for a certain amount annually to be gifted to someone without having to pay taxes.
Second, you can always buy a life plan on mom or dad and not be the owner. Instead, you would merely be the payer. You would pursue this option if, and only if, you do not want to be the beneficiary.
You could list the insured (mom or dad) as the owner. That would satisfy the two points requirement (your parent would be the owner and the insured).
Hence, there are several ways to further trim down the expenses on a life insurance policy and make it easier on your pocket. Working with us, we’ll make sure you get the best life insurance for your parents!
3. Working with an independent agent
It is extremely important to know that there is no way on Earth that one life insurance company can be the best option for every – one. This just impossible, and an unrealistic expectation to harbor. Everyone comes with their own circumstances and budget line – that one company cannot fulfill.
In addition, they all accept and reject various health issues, which is why there can’t be one company to rule them all.
So, in summation – in order to find the best insurance for your parents, it is vital to take into confidence an independent agent, who is able to step out further in his role and branch out to find the best possible insurance policies for you, according to your needs, working with various companies. The agent will pair you up with the best possible company, and land you right on top of that policy.
There are two types of agents that you will deal with:
- Captive agent: An insurance agent who can only represent on single company. For example, State Farm is a captive insurer. A State Farm agent can only sell you State Farm insurance. They cannot represent any other insurance company. State Farm strictly forbids it.
- Independent agent: An insurance agent who is free to represent as many independent insurance companies as they want. For example, Mutual of Omaha is an independent insurer. They don’t care how many other insurance companies an agent is appointed with.
What type of agent you get to work with, will largely set the pretext of how well of a policy you’re getting.
Think about it this way…
In your left hand you have one single life insurance company. In your right hand you have literally 30 different insurance companies.
If you had to choose a hand when shopping for life insurance for one of your parents, which hand do you think gives you the best chance of success?
That’s the power of working with an independent agent.
And most importantly, it won’t cost you any money! They’ll just have your best interests at heart.
All agents (captive & independent) always get paid by the insurer which is why their services never cost you any money.
If your parents have any health issues, it is even more important you work with an independent agent, so they can match you with whichever company views their health most favorably.
Going the independent route will result in much better coverage and premiums every time, without fail.
4 Choose the right kind of policy for starters!
Expanding on knowledge you may already possess, life insurance is a generalized term, and there are several different kind of policies that are available in the market.
When it comes to life insurance, different people may have different goals in mind, i.e. what do with the money once you receive it, and so, not everyone has the same goal in mind which is why there is no one size fits all type of life policy.
For example, some people want life insurance proceeds to pay off a mortgage or other debt. On the other hand, some people want life insurance to cover final expenses.
Hence, it is important for you to purchase the right kind of policy tailored to your unique situation and circumstances.
Life insurance can be broken down into two main categories. There’s permanent and temporary insurance coverage. As is the case with everything, they come with their own set of pro’s and con’s.
To briefly summarize the two – whole life insurance, as suggested by the name, lasts an entire lifetime, whereas term life insurance is period based, and relatively cheaper in comparison.
It is essential to conduct your own internet research to acquire apt information on the two, which one you’d opt for, and which serves to be the most pocket friendly, in order to find the best life insurance for your parents.
5. You do not need to be physically with them to apply
Going back a decade, you would have to physically sign papers which meant you and your parents would both need to be in the same place at the same time.
That’s now how it works today – luckily, we have technology on our side!
You and your parents could live in totally separate states and still buy life insurance for them.
In general, there’s two methods that allow you to remotely buy a life policy on your mom or dad.
- Voice Signature: With a voice signature process, the carrier will collect all your information over the phone, without you having to go anywhere. They’ll obtain all the necessary authorizations and ask the appropriate health questions (if any). At the end, they’ll have you both sign the application with your voice which will represent your consent just as if you had physically signed the application with an ink pen. Generally, these voice signature processes last anywhere from 10-20 mins, and most of them will render an immediate decision regarding the eligibility of the applicant.
- Email Signature:With an email signature, the carrier will send out two emails. One to you, and one to your parents. Basically, you’ll sign the application by clicking a few buttons. Some email signature carriers will render an immediate decision regarding your parent’s eligibility, but most take 1-3 business days to come to a decision.
You can do it any time anywhere, it’s highly convenient!
6. Don’t put it off!
When it comes to life insurance, it best to be as prompt as possible.
So if you need or want parents life insurance, do it now. You’ll be glad you did.
Consider the following:
- The older the insured is; the more it will cost.
- Your parent’s health is not guaranteed. If they experience a bad turn in their health, it could severely impact their rates and/or the eligibility altogether.
Basically, if you want to pay less, have coverage sooner than later, and have peace of mind, don’t put this off. Get your parents life insurance coverage now.
7. Make Sure You Have Their Consent First!
It is imperative for you to have obtained your parents’ consent first! You cannot buy any form of life insurance on someone else without their consent. The insured party must agree to the policy.
This applies to cases even when there is a guaranteed acceptance policy with no medical questions or under writing involved.
Even if you are going to be the one paying for the life insurance on your parents, you still need their consent.
For the reasons stated, you should definitely speak to your parents, grandparents or whoever you want coverage on, and ensure they are on board with you taking out the coverage.
Most of the time, their involvement will only consist of answering some health questions and maybe completing an e-signature. It won’t require much of their time and effort, but again they will need to be involved.
8. Avoid guaranteed acceptance life policies if you can
Exactly what the title suggests! A guaranteed issue life insurance policy is one where there is no medical or lifestyle underwriting or questioning involved and your acceptance is a 110% guaranteed. There are only two real requirements:
- The insured lives in a state where the insurer offers the product.
- The insured has the mental capacity to enter into a legal contract.
If they satisfy those two requirements, they can get a policy.
However, just because you can get one of these guaranteed issue policies doesn’t mean you should. In fact, you should only utilize them as a last resort.
And here’s why!
- These policies almost always consist of at least a two-year waiting period before a death benefit could become payable.
- They cost much more compared to life insurance plans that do have underwriting. Because they know nothing about the applicant’s health, they are taking on a much higher level of risk. For this reason, they must charge more for these plans to cover that increased risk.
Ultimately, if you want life coverage on your parents that starts immediately and costs less, avoid guaranteed issue plans unless that’s the only option you have left.
9. Don’t choose an insurance company based on how well known they are
In 2016, it was found that there were 5,977 insurance companies in the USA. If you are lucky, you’ve heard of maybe 1% of them.
So are the other 99% companies bad because you’ve never heard their name before? Definitely not.
There are very few insurance companies that blow up advertisements massively. This doesn’t make them less credible or reliable.
So be open to having insurance on your parents from an insurer that you’ve never heard of.
We say this because every life insurance company underwrites differently. What if your parents have health issues (like diabetes or heart disease) where some of the notable companies won’t take them, but another lesser known insurer will?
Answer: Go with the other insurer that you’ve never heard of because they will accept your parents and offer you a much better deal, as their underwriting doesn’t frown upon their health issues.
At the end of the day, you give you best chance possible at securing the best life insurance for your parents if you do not limit yourself only to companies that you’ve heard of before.
10. Mind Your Budget
There may be several coverage options you have in mind for your parents, but can you really afford the one you desire?
Hence, you have to keep in mind, that if you cannot afford the 12 monthly payments, you shouldn’t opt for that policy option. Go for less coverage.
Don’t get aggravated with or hung up by the fact that your budget won’t allow you to purchase what you want.
At the end of the day, you’re buying life insurance on your father or mother because you want the money to be used for something (paying a debt, final expenses, etc.).
Isn’t it better to have some money rather than no money even if that amount of money is less than you’d like?
We hope this article helped you!