Should I buy life insurance for my parents? I’ve been asked that question several times over the years. The answer can be yes in many cases, it just depends on what you are trying to accomplish. A few years ago I was called by a business owner in search of health insurance. She owned a nail salon in Middle Tennessee. After some discussion of her health insurance options, she completed an application for coverage. All of her employees were Vietnamese and the communication between me and them was a struggle at times, but I sold several of the other employees health insurance as well. As I grew the relationship, the nail salon owner referred me to other nail salons and before long I had a list of nearly 100 Vietnamese clients. Along the way, many of the women purchased life insurance on themselves and their spouses. The concept of insuring their life and that of their family was not something I even had to convince them was a sound idea, many asked me to purchase life insurance before I even discussed it. But something else was happening as well. Many of the ladies that had become my clients were also purchasing life insurance on their parents. It wasn’t a need I was uncovering and asking them to consider, they were telling me that they wanted a policy on their mother and/or father. When I asked some why they wanted a policy on their parents, the most common answer was that when their mother or father dies, they would be the ones left to take care of all expenses and they would use the life insurance policy to create instant dollars to cover this need. This makes perfect sense.
In the American culture, this was not nearly as common. Many times when I would bring up life insurance for one’s parents, the idea would be shrugged off without much consideration. But is it a good move to own and pay for a life insurance policy on your parents? In many cases yes, it is. Let’s look at a few:
Legacy – Many parents want to leave a legacy and might have a sum of money set aside designated for this purpose for their kids. A life insurance policy can take the place of the savings and free that money up for the parents to enjoy while they are alive. Life insurance proceeds also free of income tax to the beneficiary.
Funeral Costs – If you have a parent who has not done much financial planning and you know that you will be left with paying for a burial, a life insurance policy can be used to ease this burden.
Mortgage Payoff – Maybe your parent owns a house that you will inherit. A life insurance policy can be used to help pay off any remaining mortgage balance and allow you to inherit a debt free home.