The genius of adult children owning policies on their senior parents
There are many reasons an adult child may want to insure mom and dad, the most logical reason is to pay for final expenses (burial expenses, cremation, and funeral services). This is usually a small face amount policy, usually between $10,000 to $20,000 of cash death benefit and are normally way overpriced. For a much better value you might want to consider an appropriate term policy or a new whole life plan with GUARANTEED numbers. An experienced independent agent can show you many winning options on this matter.
If the parents own real estate and still have a mortgage, the adult children or immediate family members may want to take out a policy to pay off the mortgage in case of their passing. They do not want to be stuck paying on an additional mortgage. Another point, the senior parent or parents may not have cash in their accounts to gift children or grandchildren and the adult child can easily pay the premiums for a new life insurance policy that the parents could never afford knowing there will be a huge payoff someday. Another reason, is to pay estate taxes. If the parents are wealthy and own expensive real estate, they'll have to pay taxes on part of a parents estate's value, so a life insurance policy can fully cover that for them. Life insurance payouts are not taxable, so they are the perfect instrument to pay for estate taxes. Adult children who have the good sense to take policies out on their Parents is just a genius way of creating a nest egg for the future.