Can You Put Life Insurance on Your Parents?

Direct Answer

You cannot legally insure another adult under a standard life insurance policy unless you are the policyholder. To insure your parents, you must be the owner and insured, or you can purchase a policy for them and name them as the beneficiary. Direct ownership by a third party is generally prohibited for life insurance on adults.

Eligibility and Ownership Rules

Life insurance requires the insured to be the policyholder. The policy must be in the name of the person who pays the premiums and receives the death benefit. A third party cannot own a policy on another adult for their benefit.

Using a Policy for Your Parents

You can buy a policy on your parents and name yourself as the owner. The policy will pay out to you or a designated beneficiary, and you can use the proceeds for their care. However, the policy is still yours, not theirs.

Beneficiary Designation

Alternatively, you can keep your own policy and name your parents as beneficiaries. This allows them to receive the proceeds but does not cover their own death.

Tax and Legal Considerations

Premiums paid by a third party on another adult are treated as gifts, potentially subject to gift tax if over the annual exclusion. The policy's cash value growth is tax‑deferred, but withdrawals or loans may trigger taxes. Ensure compliance with state insurance regulations and consult a tax professional.

Practical Steps

1. Confirm you meet the insurer's underwriting criteria. 2. Decide whether to own the policy or name a beneficiary. 3. Complete the application and provide required documentation. 4. Review the policy's terms, riders, and exclusions. 5. Keep records of premium payments and beneficiary changes.