Is it important to invest in life insurance for your parents?

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Many individuals find themselves supporting their aged loved ones at some point in their lives. Many people utilize a part of their savings to take care of their parents; some others take an extended leave of absence from work to help nurse their parents back to health. Some even pay off mortgages after their parents’ demise.

However, costs associated with these could potentially throw someone’s entire savings plan off track and leave them in debilitating debt. Thus, buying life insurance may turn out to be one of the most important financial decisions for any family. It is also a great way for individuals to safeguard their and their parent’s financial well-being.

If your parents do not already have insurance cover, you can reason with them to invest in the same. Make them see how a life insurance policy is a great way to recoup lost savings and income in various stressful situations. However, before deciding when and how to invest in a life insurance policy for your parents, it is crucial to get a well-rounded understanding of the pros and cons attached to it.

Pros

• Invest in Fixed Benefit Health Plans: A fixed benefit health plan is where a fixed amount is paid out to cover the expenses for a predetermined illness that has been covered. These plans do not demand reams of documents and paperwork and have an easy claim process. Investing in such health plans for parents is a clever move and can relieve financial stress in medical emergencies. It is also ideal to invest in an extensive health plan before parents hit the senior citizen milestone. This will ensure that your parents are taken care of right from the beginning.

• Regular Income for Both Parents: Several parents depend on their children for their well-being in old age. By investing in regular income reaping category policies for their parents, one will not have to worry about their parents’ future. Investing in long-term life insurance policies which pay out a regular income for long periods can serve as an additional source of income for parents. One can even help their parents be financially independent by investing in annuities for them. These are specifically designed to meet the long term income needs of people and are a proven method of complete financial freedom.

Cons

• Misunderstanding Between Children and Parents: Most parents don’t want to burden their children hence before buying a health plan or a regular income yielding life insurance plan for parents, it’s advisable to consult them and explain the benefits of the plans. These should be looked at as avenues to sustain a parent’s lifestyle in any health / life emergencies. Else, this step may be looked upon by parents as a way of emotionally distancing them from their children.

• Conflict Among Beneficiaries: The benefits of buying a life insurance policy for parents may spill over to beneficiaries surviving after them. In an ideal situation, every beneficiary would get proportionate insurance cover in case of the demise of either of the parents. But, families with multiple siblings often get into a conflict when one person gets more benefits than the other. That is why every sibling must understand the terms of the life insurance policy purchased for their parents. Utmost clarity will help everyone be on the same page.

Parents spend most of their life caring for their children. So, it is only fair for them to expect their children to support them when they find it difficult to physically manage themselves. Moreover, escalating inflation might even force parents to seek financial assistance at some point in their life. Thus, by making the right insurance moves, it is easy to not only future-proof oneself, but also give parents a strong sense of financial security.

(The author is Chief Financial Officer, IndiaFirst Life Insurance. Views expressed are personal.)