Buying Life Insurance For Your Parents: Is It Wise? Is It Wrong?

I lately received an electronic post from a reader that I thought would be perfect for intelligence, because my hunch is that there are others who are dealing with or guide hold got dealt with a province of affairs similar this. I promised that I would exertion to get some opinions from the CPF audience, then if yous have got whatsoever thoughts or opinions, please per centum them inward the comments.

Here are the of import parts from the electronic mail I received…

I have a question that I’m wrestling with, which I’m hoping you can help me with. Recently my siblings have been talking to my mother and I about taking a life insurance policy out for her, inwards the trial that she passes, a meat of money could be left for her kids in addition to grandkids. The thought would be that we would all co-fund this insurance with her together with them.

I’1 K struggling with this on ii levels.

Financially: I’m not sure it is a smart financial decision. My mother is in her early sixties and in relatively good health. The prospect of paying life insurance for the side yesteryear side 25 years or hence is non rattling appealing.

Morally: I experience similar I’1 1000 making a bet on her expiry… a self-serving activeness. My woman rear is depression income together with I would rather gear upwardly coin away inward the final result that she could not attention for her self (healthcare, long term living assistance, etc.).

I emailed yous because your website seems to strike the remainder between financial too moral wisdom. Please suggest me, this theme is likely to come upward over the holidays.

My thoughts

You know how sometimes yous correct away proceed a potent sentiment nigh something, as well as other times y'all actually have got got to slice of run at it to decide what you lot intend most something? Well, I guide hold been thinking around this for a patch as good as am having a difficult fourth dimension deciding what I recollect – too thus I gauge I should simply offset writing and run across what comes out…

I intend a few important questions to inquire are…

What does the female parent intend nigh all this? Is she inward total dorsum upward of it because she wants to get out some cash to her heirs, or is she beingness bullied into it?

If she is fully behind the plan, it could handgrip out viewed as similar to her taking the policy out herself, except that she needs the assistance of the children to pay for it – which is fair, since they volition last the ones who volition do sound from it anyway.

What I don’t like about it is the “gambling on her death” human face up. If the children are actually motivated to bring out the policy entirely for their ain monetary gain, it seems similar it could create a piffling bit of a conflict of interest between wanting your parents to move on a long skilful for you life as well as wanting to get a obese cheque.

Is it a wise financial determination?

To me it seems that in that location is simply almost an inverse relationship betwixt it existence a wise financial determination as well as it existence morally acceptable. If she was inwards wretched wellness (but was still able to be insured) it would probably get a much better financial determination because your ROI would probable be a lot greater, but I would feel pretty shady if I took a policy out inwards those circumstances.

On the other paw, if her wellness is slap-upward, together with yous would have got to pay into the policy for 25 years (likely with a really high premium) it seems that it wouldn’t survive nearly equally skilful of an investment.

Saving it for her instead

Personally, I similar the idea that was mentioned of saving it upwardly for her instead. With her not beingness rattling good-off financially it seems that saving upwardly for medical expenses, long-term attending, etc. would be a beneficial conception. It would do goodness her if she got to a indicate where expenses got out of mitt, but it could also do good the children past minimizing the possibility that they would have got to furnish fiscal assistance. Then, if the coin saved was never used, it could alive on divided back upwards amongst the children.

All inward all, I intend I would prefer to run life insurance to render for venture who tin’t adequately covert themselves. Assuming the children are all on their have got ii feet financially, it would live on something I would inwards all likelihood exceed on.