People typically take out life insurance for themselves and a joint policy with their partners. But can you take out a life insurance policy for a third party, for example, your parents?
If you have what is called insurable interest, you can take out a life insurance policy for other people, including your parents.
You have insurable interest in a person if you would suffer a financial loss or hardship when they die. You could have insurable interest in your parents if you would need to pay off their debt, their mortgage, their bills for care or medical treatment, or their funeral costs when they die. The requirement to have an insurable interest in the subject of a policy exists to prevent people from taking out life insurance policies on more distant relatives, friends or even strangers they suspect will die soon in order to cash in.
You’ll also need your parents’ consent to take out a life insurance policy on their behalf. You must also obtain from them details about their medical history and health to include in the application. Additionally, you should ask your parents if they already hold active life insurance policies that may eliminate the need for you to take out another for them.
You also have to consider what type of cover would be appropriate. Your parents may be too old or have too many health conditions to qualify for affordable term life insurance. If you really want a term life insurance policy for a parent, you may need to pay high premiums or use a specialist provider that accepts pre-existing health conditions.
Another option is an over 50s life insurance policy, which offers guaranteed, fixed payouts no matter when the person dies. Acceptance is usually guaranteed, regardless of the person's age or health conditions. However, the payouts are usually modest, likely only enough to cover a funeral, and if your parents are long-lived, you may end up paying more in premiums than you receive as a payout.
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