Yes, you can purchase life insurance for your parents to help cover the final expenses they leave behind. In order to buy a policy on a parent, you will need their consent along with proof of insurable interest. The type of policy you buy will depend on their age, financial situation, and their overall health.
Can someone else own your life insurance policy?
Ways policies can be owned However, any person or legal entity can own life insurance on another person as long as the policyowner has an insurable interest in the insured. Spouses are assumed to have an insurable interest in each other. The same holds true for parents and children.
What happens if I buy life insurance on my dad?
If you buy life insurance on your father, you can name yourself as the beneficiary, or someone else, and the beneficiary would receive the death benefit proceeds from the life insurance policy upon your dad’s passing. The proceeds from the life insurance are free from federal income tax.
Can a parent transfer ownership of a life insurance policy?
In order to not be included in the parents’ taxable estate, it’s not uncommon for parents to transfer ownership of the life insurance policy to an adult child. The child would then become responsible for the premium payments but the parents could gift the child money to pay the amounts if they choose.
What should I do about my parents life insurance policy?
1. Take ownership The first thing to do is take ownership of the policy. If your parents want you to start paying for it, you should put in an ownership transfer request through the carrier and add yourself as the payer on the policy. Becoming the owner takes it out of your parents’ hands and officially makes you responsible for it.
How can I own my own life insurance policy?
A child rider on the parent’s own policy is one option. You can learn more about how this works in our blog post Everything You Want to Know About Child Riders. Another option is to buy a permanent life insurance policy on them in which you can one day even transfer ownership to them.
