Can You Get Life Insurance on Your Grandparents?

Life insurance serves as a financial protection tool, designed to provide monetary support to designated beneficiaries upon the death of the insured individual. It functions as a contract between an insurance policyholder and an insurer, where the insurer promises to pay a sum of money in exchange for premiums. This arrangement helps families manage financial obligations and secure their future during challenging times. It also addresses the common question of extending this financial safeguard to various family members.

Understanding Insurable Interest

Obtaining a life insurance policy on another person requires demonstrating “insurable interest.” This principle ensures the policyholder would experience a legitimate financial or other loss if the insured individual were to pass away. It prevents the use of life insurance for speculative or unethical purposes. Insurable interest must exist at the time the policy is purchased.

For a grandchild to insure a grandparent, a mere emotional bond is not enough to establish insurable interest. A reasonable expectation of financial hardship or loss for the grandchild upon the grandparent’s death is required. For instance, if a grandchild is financially dependent on a grandparent, contributes to shared living expenses, or would be responsible for significant final expenses like funeral costs, insurable interest may be established. Documentation proving this financial connection, such as shared bills or evidence of dependency, may be required by the insurer. Without demonstrable insurable interest, an insurance company may deny the application or void a policy if issued.

Suitable Life Insurance Options

Various life insurance policy types suit older individuals, including grandparents, depending on their health, financial goals, and desired coverage duration.

Term life insurance provides coverage for a specific period, such as 10, 20, or 30 years, and can be a cost-effective option for a substantial death benefit. Term policies may have age restrictions on available term lengths, and coverage ceases if the insured outlives the policy term.

Whole life insurance is a permanent type that offers lifelong coverage as long as premiums are paid, and includes a cash value component that grows over time. This cash value can be accessed through loans or withdrawals during the insured’s lifetime. While more expensive than term life, whole life policies suit those seeking guaranteed lifelong coverage and a legacy.

Universal life insurance is another permanent option providing lifelong coverage and a cash value component, with more flexibility in premium payments and death benefits than whole life.

For individuals who may not qualify for traditional policies due to health concerns, guaranteed issue life insurance offers acceptance for those between ages 50 and 85, without medical exams or health questions. These policies have lower coverage amounts, up to $25,000, and may have a graded death benefit period, meaning the full death benefit is not payable for the first two to three years unless death is accidental.

Final expense insurance, also known as burial insurance, is a smaller whole life policy designed to cover end-of-life costs like funeral expenses. It features simplified underwriting, requiring only answers to health questions rather than a medical exam, making it accessible for many seniors. Coverage amounts for final expense policies range from $5,000 to $25,000.

Preparing for the Application

Before submitting a life insurance application for a grandparent, gather specific information from both the grandparent (the proposed insured) and the grandchild (the applicant).

The grandparent’s full legal name, date of birth, and Social Security number are basic requirements. Their medical history, including diagnoses, surgeries, current medications, and physician contact details, will be needed. Lifestyle habits, such as smoking, alcohol consumption, and hazardous hobbies, are also relevant.

For the grandchild, demonstrating insurable interest is a primary focus. This involves providing documentation illustrating the financial relationship with the grandparent. Proof of shared financial responsibilities, such as joint bank accounts, property deeds, or utility bills, can be helpful. If financial dependency exists, tax returns or other financial records showing contributions or support may be required to substantiate potential financial loss. Preparing these documents and understanding the questions asked can streamline the application process.

Navigating the Application and Policy

After gathering all necessary information, the life insurance application can be submitted through various channels: an insurance agent, an online portal, or by mail. Once submitted, the application enters the underwriting process, where the insurer assesses the risk of insuring the grandparent. This phase involves a comprehensive review of medical and financial information.

Underwriting may require additional steps, such as a medical exam, which includes measurements of height, weight, blood pressure, and collection of blood and urine samples. Insurers may also request medical records from the grandparent’s healthcare providers or conduct a telephone interview for more details about health and lifestyle. The process duration can vary, ranging from a few days for simplified applications to several weeks or months for fully underwritten policies, depending on health history complexity.

Following the underwriting review, the insurer will make a decision, resulting in approval, denial, or a modified offer with adjusted terms or premiums. If approved, policy documents will be issued, outlining the death benefit, premium schedule, and policy terms. Post-approval, ongoing policy management includes making timely premium payments to keep coverage active. Policyholders can change beneficiaries by contacting the insurer and completing a specific form, though limitations may apply. Regular policy reviews are advisable to ensure it continues to meet current financial needs and circumstances.