22nd Jun 2021
Life Insurance
By Ashley Shepherd
Even though you’re unlikely to still be financially dependent on your mother and father, buying life insurance for your elderly parents could be worth thinking about.
As our parents get older, we tend to get more involved in their financial affairs. While no one likes to think about them not being around or the financial implications that follow, it’s sensible to make plans with your parents now, to ensure things run as smoothly as possible when the time comes.
Why might you take out life insurance for your parents?
There are many reasons why life insurance may be relevant to parents over 50, one of the most popular being to help cover costs when they die. The cash payout from a life insurance policy can be used to help pay funeral costs, any unpaid mortgage or other outstanding debts.
However, before making any decisions, it’s important to look at any existing policies your parents may have and understand why they might want life insurance now. This will help you decide on the right type and amount of life cover required.
Life insurance for parents over 50 – points to discuss
We understand this may be a sensitive conversation to start, so to help you, we have gathered together some of the main points your parents may want to consider:
- Would their death impact any family members financially?
- Do they still have a mortgage?
- Do they have any other debts or loans that would need to be repaid?
- Are they willing to have a medical or answer questions on their health and lifestyle if asked? If not, over 50 life insurance with no medical, may be the most appropriate option.
- Do they already have life cover, or have they ever taken a policy out in the past?
- Will their estate be subject to inheritance tax?
- Have they thought about how funeral costs will be paid?
- Would they like to gift money to any family members or friends?
- How much could they comfortably afford to pay each month?
- Do they each have a will? If not, it may be worth writing their wills so that their final requests are in order.
Consider the cost of life insurance
The cost of life insurance will depend on several factors, including:
- Your parents’ ages
- The state of their health
- Their lifestyle
The type of insurance your parents choose, and the amount of life cover they need will also affect the cost. Remember, monthly premiums may be payable for a long time – often for life – so take into account any foreseeable changes that may affect their income in the future.
What is the best life insurance for elderly parents?
Once your parent or parents have considered the purpose and amount of the life cover required, it’s important to understand the types of life insurance plans available so they can choose which might best suits their needs:
Whole of life insurance
Whole of life insurance plans provide cover for the whole of your life and guarantee to pay out an agreed cash sum on death. Monthly premiums are payable either for life or to a certain age, which is usually around the insured person’s 90th birthday.
Guaranteed over 50 life insurance
Guaranteed over 50 life insurance tends to be a popular choice with the over 50s, mainly because of its simplicity and affordability. Your parent would not need a medical and wouldn’t have to answer any health or lifestyle questions to apply. They are guaranteed to be accepted and will be covered for the full cash sum after an initial waiting period of 1 or 2 years, depending on the plan provider. If they were to die during this time, all the monthly premiums paid up to that point would be fully refunded.
Regular whole of life insurance
This type of life cover also pays out a cash sum on death, but acceptance is dependent on answers to health and lifestyle questions. If your parent is accepted, they would be covered for the full cash sum immediately and could get at least 40% more life cover for their money. So, if they are happy to go through a longer application process, it may be worth comparing life insurance quotes for both options.
Term life insurance for elderly parents
Term life insurance pays out a cash sum on death but only if the person insured dies within a specified timeframe. Your parent would agree on this timeframe when applying. If they were to die within the agreed time, the cash sum would be paid out, however if they die outside of the agreed timeframe, no money would be paid out.
These are the different options available to your parents:
Level term life insurance
Level term life insurance would pay out a cash lump sum if your parent died within the agreed timeframe. The cash sum is fixed so remains the same throughout the duration of the cover.
Decreasing term life insurance
Decreasing term insurance also pays out a cash sum on death within an agreed timeframe but the size of the cash sum decreases through the years. Many people choose decreasing term life insurance to provide protection against mortgage or loan repayments which reduce over time. So if your parents still have a mortgage on their home, this might be a good option to consider.
Increasing term life insurance
Increasing term life insurance is based on the health of your parent when the plan is taken out, however the value of the life cover increases on a yearly basis to keep in line with inflation rates. This could be a suitable option if your parents are relatively healthy and have enough money to pay the increasing premiums for the duration of the plan.
Convertible term life insurance
Convertible term life insurance will give your parent the option to “convert” (adapt) the life cover as and when they need to, without being asked any further health questions. This type of insurance is a little more flexible and allows for changing circumstances as your parents get older.
Renewable term life insurance
Renewable term life insurance gives your parent the chance to renew their life cover when it expires regardless of their state of health. However, there’s usually an age limit so be aware of the cut-off point.
Many term life insurance policies also offer the option to include critical illness, which provides cover for certain specified illness. However, this will increase the monthly premium and will only protect against those illnesses detailed in the policy documents.
Can you buy life insurance for a parent without their consent?
No, you will need to get your parents’ consent to buy life insurance for them. It’s also very likely that the insurance company will require them to have a medical examination unless they choose no medical over 50s life insurance.
A difficult conversation worth having
Conversations about death can be difficult, but while it can be hard to think about, it’s also important to help your parents prepare, as having plans in place can save them a lot of worry now and makes things that bit easier for the rest of the family when the time comes.