Buying Life Insurance for Parents: Benefits, Tax Rules, and Policy Tips

10 min read Posted on 8 Jul 2024

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Buying life insurance for parents is a thoughtful gesture to protect the financial security of your loved ones. As your parents grow older, their financial responsibilities shift. Their medical expenses can rise, and retirement income is is often limited. A life insurance policy in their name can protect their financial legacy and also help the surviving partner of the parent to meet their expenses without imposing an additional financial burden.

Let's explore why you should buy life insurance for elderly parents. It can cover all the final expenses without creating a strain on your financial savings.

Why You Should Buy Life Insurance for Elderly Parents?

Life insurance for elderly parents is often overlooked. Yet, in many households, retired parents continue to make meaningful financial contributions through their pension or savings. They might also have a lot of outstanding debt or leave behind a lot of final costs. In such cases, life insurance can provide essential financial support—not only easing the burden on surviving family members but also offering peace of mind to everyone involved. Some of the reasons why you should buy life insurance for elderly parents are:

Pay medical and funeral costs without stress

Several costs, like hospital bills, funeral costs and other miscellaneous expenses regarding old age, can easily cost lakhs of rupees. Even if you have health insurance for parents, it may not be enough to cover all the medical expenses incurred. Some parents may also need hospice care, and that could have put a dent in your finances. A life insurance policy offers death benefits to the dependants after the insured passes away. Settle loans and debts

Settle loans and debts

If your parent has incurred liabilities and loans, the life insurance can be used to pay off these debts. For instance, loans and credit card bills can be settled with life insurance claims. It helps avoid legal complications to settle liabilities and reduces financial stress for other family members.

Protection for a dependent spouse or sibling

Your parent may leave behind their spouse, and they can have peace of mind knowing that their dependant spouse's expenses will be managed with the payout. Sometimes, your parents may also have dependent siblings, and taking care of them becomes manageable if you receive a life insurance payout.

Can You Buy Life Insurance for Parents Over 60?

Depending on the insurance provider, the entry age for life insurance can be 60-70 years. You may buy life insurance for your parents as soon as you start earning to ensure their financial security. Even if you have not done that in your 20s or 30s, you can buy life insurance for your parents at any time as long as they don't exceed the maximum age limit. With riders, you can easily extend this coverage to up to 99 years, ensuring your parents have financial protection until they breathe their last.

Parental Life Cover Tax Benefits

Under the old tax regime, you could get tax benefits in the form of deductions for premiums paid for your parents' life insurance. This is subject to the maximum limit of 1.5 lakh according to Section 80C of the Income Tax Act. Under Section 10(10D), the payout you receive is exempt from tax. If you follow the new tax regime, the Section 80C deductions may not be applicable for you, but you can still get a tax exemption for the payout under Section 10(10D).

Best Life Insurance Plans for Parents

You can customise life insurance policies for parents based on how you want to receive the payout. Some of the popular options are:

Term Life Insurance
t provides financial security for a set period. During the policy term, if the insured parent passes away, the nominee can get the death benefit. This policy will be valid only until the policy term. Some plans allow you to extend the term up to 99 or 100 years, ensuring long-term peace of mind.
Whole Life Insurance –
This policy provides coverage until the death of the insured person. It can extend to up to 100 years of age for your parents. The beneficiary mentioned in the policy document can receive the payout. It can be any of your family members.
Retirement Plan –
It's also possible to create a retirement plan for your parents where you pay for the insurance policy for a certain period, and the parents can receive the benefits as steady income. This policy can be useful in managing the living expenses of your parents and giving them financial independence in their old age.

How to Choose the Best Life Insurance for Parents 2025

Customising your parents' life insurance policy is crucial. Consider the following factors before choosing a policy:

Evaluate your parents’ needs
Consider why you are buying the life insurance. Is it for debt repayment, legacy building, or to offer retirement support for your parents? Accordingly, you can choose life, term, or retirement plans for your parents.
Choose the right policy duration
Ideally, the tenure of the life insurance policy must match the life expectancy and coverage needs. When your parent is 65 years old, a 10-15 year term plan may be sufficient. In case you want to build a legacy, whole life cover is necessary.
Select the sum assured
The sum assured for the life insurance must be determined based on your needs. Higher sum insured results in a higher payout at the end of the policy term or as a death benefit. However, it also means that your annual premiums are higher.
Add riders for extra protection
Many life insurance companies offer additional riders at an additional premium to extend the coverage. For example, a critical illness rider pays a lump sum for a critical illness diagnosis. For term plans, the riders can extend the policy term up to 99 years of age.
Compare plans
Different types of life insurance plans offer different types of protection. Consider all the options and compare policies from various providers to pick a plan that is right for you and your family.

summary

Buying life insurance for parents is the right decision if your parents are financially dependent, have liabilities, or you want to build a legacy around their name. The right policy ensures that their needs are met and your family stays protected from unplanned expenses. With the added advantage of tax benefits, paying policy premiums may not impose a strain on your monthly and annual budget. Ensure that you choose a policy based on your needs and compare insurance providers to make the right choice. Want to buy affordable life insurance for parents? Explore RenewBuy to compare different policies and choose the right one.

Disclaimer: The content published in this article is intended solely for the readers' informational purposes and should not be relied upon for personal, medical, legal, or financial decisions. It is advisable to seek advice from a qualified professional regarding specific concerns. The details provided regarding the plan are for reference purposes only. Please visit the insurer’s website for the latest updates on the plan. The company does not guarantee suitability, reliability, timeliness, or accuracy of the information, services, or any other aspects mentioned in this regard for any purpose. We do not endorse any insurance company or insurance product provided by any insurer.