Can you take out life cover on your parents’ lives? Yes, because they are direct family members and you share a bond of love and trust. We find out what you need to know about taking out life insurance on your parents’ lives.
- You can take out life insurance on your parents’ lives if they are direct family members and you share a bond of love and trust
- You will be the policy owner, responsible for paying the premiums
- There is one life assured on a policy - so either your mother or father will be the life assured
What is an insurable interest?
In life insurance this term means that someone would be negatively affected if the person being insured were no longer around – not necessarily in a financial sense. You have an insurable interest in your direct family members due to the family relationship and bond of love and trust between you.
How do you take out life insurance on another person’s life?
In life insurance there are various parties. These are:
- Life assured: The person whose life is insured - when they die the policy will pay the sum assured for a valid claim.
- Policy owner: The person who owns the policy and is responsible for paying the premiums and keeping the details up to date. The policy owner can be the life assured, or someone who has an insurable interest in the life assured.
- Beneficiary: The person who receives the pay-out for valid claims. There can be more than one beneficiary, and the policy owner names the beneficiary.
When you take out a policy on another person’s life, they become the life assured and you become the policy owner.
So, if you have an insurable interest in your mother’s life, for example, you can take out a life cover policy where you are the policy owner and she is the life assured.
As the life assured, your mother will need to answer all the underwriting questions and have any medical tests such as an HIV test. As the policy owner you need to show why you have an insurable interest. You are also responsible for paying premiums.
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Two things to remember
- Many insurance companies have an entry age limit for the life assured, which means that once the person whose life you want to insure reaches a certain age, they cannot take out life cover. At 1Life the life assured must be younger than 65 years to qualify for life cover.
- Both the life assured, and policy owner must follow the rules of the policy. For example, life insurance will not pay a claim if it is found the life assured or policy owner were taking part in criminal activities.
So, should you take out life insurance on your parent’s lives?
Your individual circumstances will affect your answer. Think about their current commitments and how those would need to be taken care of should they pass on. Remember to look at various life cover options, decide on a sum assured and affordable premium – as certain limits may apply.