Life Insurance for Parents

Written by Jeff Root

Parents nurture and care for their little ones all the days of their lives. That’s why a parent’s death is so devastating to children no matter the child’s age. Whether your child is 5 or 55, the loss of a parent can be emotionally traumatic and also financially destructive.

Reviewing the best life insurance companies for parents today will help moms and dads better prepare their children for tomorrow. Of course, a life insurance policy will never replace the love of a parent but it is truly the last loving act a parent can do.

Finding the Perfect Life Insurance for Parents

The birth of a child is a very momentous time and also overwhelming when you realize how expensive raising children can be. This is usually the first time young adults start thinking about buying a life insurance policy.

After all, parents need to be sure their child is provided for should anything unexpected happen and they are no longer alive to take care of the child. What is the best way to provide this financial nest egg? Life insurance for the parents!

For parents who already have life insurance, you may want to consider contacting your current provider and speaking with them about some options you have to either convert your policies or bundle them together.

The benefit to doing this is you’ll receive a pretty nice “bundling” discount on each policy including the life insurance coverage. The bundling discounts can range from 5% to 25% for each insurance policy. These savings are pretty nice for a growing family.

Determining How Much Life Insurance Coverage You Need

Once you identify the best life insurance company and policy for your family’s needs then you’ll need to decide on the right benefit amount. It can seem like an overwhelming task to guess what amount of money will keep your children financially secure.

Ask yourself how much money will the family need to sustain their current lifestyle? What amount of money will your spouse need to cover the mortgage and pay for childcare or education? What could the cost be for your funeral, burial and outstanding medical bills?

There are no precise answers to these questions because the variables involved are constantly changing. However, you don’t want to pay premiums for a $500,000 life insurance policy when a $100,000 life insurance policy will do just fine.

You also don’t want to select a $50,000 life insurance policy that will only cover your funeral costs and one year of your children’s expenses. In that case, what would your children do for future years when you will not be here to take care of them?

So How Much Life Insurance Do I Need?

Usually, you want to factor in a few major things into your life insurance policy:

  • Large loans (student, mortgage, car…)
  • Credit card debt
  • Salary now
  • Years left in career (x expected salary)
  • Financial dependents (how many, how long)

In order to determine how much life insurance you need, you first must calculate how much debt you have.  From there, you want to calculate your salary.  How much annual income will your family now be left without in the case of your death?

You also want to calculate the time you have remaining in your professional career, how much money you would have made throughout the course of your career.  You also want to keep in mind how long your dependents will need you to be financially secure.  For instance, if your child is a toddler, they will likely be dependent on your income for 15-20 more years.

Lastly, you want to consider how much your spouse or significant other makes.  You want your life insurance policy face amount to reflect the overall financial loss that could be caused to your family in the event of your death, and what they would need in order to live comfortably, independent of your income.

Get out a piece of paper and your calculator to do some figuring, talk with your spouse, and review everything with your life insurance agent.

What are some of the Best Life Insurance Rates for Parents?

Each family will have their own financial needs based on a variety of different factors. When purchasing a life insurance policy for parents, it is important to take the factors we have listed above in mind in order to identify the best life insurance rates for you.

While we can’t promise these rates will be exactly the same for every individual, here are some average rates for a few different scenarios  to give you an idea of how much life insurance costs.

Emily and Josh are both 30 years old, and have just had their first child.  Both are non-smokers, and very healthy individuals who exercise on a regular basis and eat healthy. Josh works as an electrical engineer, while Emily is at home with the baby.

Josh knows that in the event of his death, he needs a life insurance policy that can account for Emily and Jayden’s living expenses at least until Jayden has finished college.

Using our outline above, Joshes need for coverage would look something like this:

  • Mortgage – $300,000
  • Vehicles – $24,000
  • Credit card debt – $2,300
  • Salary x remaining years – $50,000 x 20 = $1,000,000
  • College for Jayden – 4 years x $40,000 = $160,000
  • Total = $1,486,300

In order to cover Emily and Jayden financially, until Jayden is done college, and replace his salary for 20 years, he would need roughly a $1,000,000 policy.

For a 30-year-old man and woman, in good health, here is a chart to show the best term life insurance rates (monthly):

Face Value Term Men Women
$100,000 10 Year $7 $6
$100,000 20 Year $9 $8
$100,000 30 Year $12 $11
$100,000 Whole Life $72 $64
$250,000 10 Year $9 $8
$250,000 20 Year $13 $11
$250,000 30 Year $19 $16
$250,000 Whole Life $104 $88
$500,000 10 Year $13 $12
$500,000 20 Year $20 $17
$500,000 30 Year $32 $27
$500,000 Whole Life $160 $136
$1,000,000 10 Year $20 $18
$1,000,000 20 Year $33 $28
$1,000,000 30 Year $57 $47
$1,000,000 Whole Life $264 $224

While this seems like a lot, numbers add up quickly over a lifetime.  Chances are, you may be in a different situation, and perhaps share an income, meaning each of you only need a fraction of this coverage.  Perhaps you already have a life insurance plan through work that cover up to 65% of your salary if injured at work, so you only need to supplement it.

The point is, you want to do some long hard thinking about how much coverage you need.  It can be very helpful and insightful to speak with an insurance agent to help you decide how much life insurance you need.

Choosing a Beneficiary for Your Life Insurance Policy

Most parents will make their spouse the beneficiary of the life insurance policy. This seems reasonable since the surviving spouse will continue to maintain the home and care for the children. All proceeds from the death claim will be issued to the remaining spouse and he/she will do what’s best with the funds.

Single Parents

For a single parent that wants to leave the life insurance proceeds directly to his/her minor children, we recommend you establish a trust or name the children’s guardian as the beneficiary. Minor children that are listed on a life insurance policy do not receive the proceeds from the policy.

Instead, the situation is referred to a court and the judge will establish a trust for the minor child. The trust (like a savings account) will hold the child’s life insurance benefits as instructed by the judge.

Normally, the court will name someone to handle the death benefit for the child until they are deemed old enough to receive the death benefit. The problem with this is the court system may select someone to handle the life insurance money that you would not want doing so.

That’s why it’s best to initiate a trust for your child while you are setting up your life insurance policy. If you set-up the trust now then you will be in control of who is named the trustee and will be responsible for managing the money.

One other option for giving death benefits to your children is for you to designate the person who will claim guardianship of your children and also be named as the beneficiary of the life insurance policy. This grants the guardian the ability to allocate the money from your death benefit for your children’s welfare. One thing to be sure of in order to protect your children and your finances in the event of your death is to get everything in contract so that your will can be executed even if you die.

Parents with Adult Children

For adult children, you can obviously name them as the beneficiary with no issues. In fact, you can name multiple beneficiaries to your life insurance policy.

If you have four grown children and you wish for them to each receive the same portion of money from your life insurance benefit, you will include that on your life insurance application. In that case, each child would receive an equal 25% of your life insurance policy’s face amount.

You can also assign different percentages to each child. Maybe you wish to leave 75% of the money to your oldest child and split the remaining amount equally among the three younger children. That is completely your decision.

If any of your children have special needs, you will want to be sure the life insurance funds are directed to a special needs trust to protect them from losing government benefits.

Buying Life Insurance for Your Own Parents and Others – Insurable Interest

Maybe you are a grown child that is concerned because mom or dad do not have life insurance. How will you cover their funeral expenses and any medical bills left behind? Where will you find the money to pay for both their mortgage and your own at the same time?

The weight of losing a parent and also dealing with the financial debts left behind is something you will certainly want to avoid. It’s very common for adult children to shop for life insurance on their parents.

Wait a minute, is it okay for a child to take out a life insurance policy on their parents? Isn’t there some law against doing so?

It’s perfectly acceptable. Anyone can buy a life insurance policy on another person if they are able to prove “insurable interest”.

What is Insurable Interest?

Insurable interest simply means you would suffer a financial burden if the person passed away. There are a variety of scenarios where insurable interest is obvious and can be proven to the life insurance company.

For example, you can take out of a life insurance policy on the father of your child. Let’s say your child’s father dies and now you are solely responsible for the child’s financial well-being. You are no longer receiving the child support dad was contributing.

This proves you have an insurable interest and it makes sense that you would have a life insurance policy on your child’s father. Insurable interest is demonstrated by blood, marriage, or a business relationship.

Examples of insurable interest include business partners, ex-spouses that share children, and elderly parents. There are many different scenarios where you may be put in a perilous financial situation because of someone’s passing.

If you can prove this to the underwriter then you should be able to secure life insurance coverage. You would then be the policyholder (and the payor) and the person you are covering is the insured.

Do I Need Consent to Purchase Life Insurance for my Parents?

Even though you may have an insurable interest and are able to take-out a life insurance policy on your elderly parent or father of your children, it doesn’t mean you can do so without their knowledge. The hard and fast life insurance rule is that the insured person must sign a consent form agreeing to the policy being issued.

Also, depending on the type of life insurance policy you buy, the insured person may need to submit to a basic medical exam. These are things you can’t do without the insured’s participation and agreement.

If you have an elderly parent that is in a nursing home or has dementia (or Alzheimer’s disease) then you will not be able to secure a life insurance policy for mom/dad.

This is because mom/dad are not able to truly give their consent and the life insurance company will decline the application.

Life Insurance for Divorcing Parents

It’s become increasingly more common for family court judges to instruct divorcing parents to buy life insurance policies. This decree will appear as part of the couple’s property and settlement agreement. The agreement will often go into great detail.

It will instruct the divorcing parents as to what type of life insurance policy is required, the specific death benefit amount needed, the names of the beneficiaries, and detail who will make the premium payments.

The 9 Best Life Insurance Companies for Parents

To help you get an idea of the best life insurance companies for parents (and non-parents alike) we’ve gathered the following list:

Company A.M.Best Customer Reviews
1. Haven Life A++ 4.4 / 5
2. Banner Life A+ 4.3 / 5
3. AIG A 4.1 / 5
4. Prudential A+ 4.2 / 5
5. MetLife A+ 3.9 / 5
6. Voya BBB+. 4.1 / 5
7. Mutual of Omaha AA- 4.0 / 5
8. New York Life AAA 4.0 / 5
9. Transamerica A 4.0 / 5

For each one of these companies, we took into account financial ratings which show stability, customer reviews which show satisfaction, and rates which show value.  All of our best life insurance companies for parents have a healthy mix of these 3 key ingredients.

Each parent has a unique health history and lifestyle so some life insurance carriers may work well for one parent and not so great for another. The best thing to do is plenty of research before applying to one specific life insurance carrier.

Research ahead of time will save you a lot of frustration during the application process. There is certainly a perfect life insurance company for each parent. It’s just a matter of doing the homework.

Best Life Insurance for Parents – Wrapping it Up

Becoming a parent is a blessing, but it is no cake walk and does not come without its own unique stresses. More often than not, becoming a parent is one of the first times people begin considering purchasing life insurance.  This is a good instinct.

If something were to happen to you, you want to be able to provide for your family.  Life insurance is a great way to do this.

When considering how much life insurance you need, you want to take into account all of the money you will make over your career, and any debts you have that will need to be paid.  You also want to account for how much your family depends on your income to get by.

While purchasing life insurance, it is very important to weigh your options.  It is a big investment, and naturally, you want to get the best life insurance coverage for your children and your family.

For this reason, even with your new knowledge of life insurance for parents, we still recommend that you always speak with an independent life insurance agent who can compare rates from dozens of competitors to specifically tailor to your needs, your health situation, and your financial situation.

Online quoting engines are a nice way to get ballpark estimates of pricing, but you can never truly know what options you have until you speak with an insurance agent.

Compare the Best Life Insurance Rates for Parents

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About Best Life Insurance Companies
About Best Life Insurance Companies

We work with individuals across the nation to secure the best life insurance rates.

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