With Mother’s Day just around the corner, you may be trying to find the perfect gift for mom to show her your love and appreciation. She does so much for you after all! Make Mother’s Day extra special and let her know how much she means to you with a thoughtful gift.
You may have thought about getting her flowers, a spa package, or dinner, but a truly meaningful gift that may not have crossed your mind is life insurance. This gift will give your mom peace of mind that when she passes away, her loved ones will be financially protected.
In Canada you are legally able to purchase life insurance for your mom (or anyone for that matter!) if you would like to. However, there are two things that need to be confirmed for this to be possible:
To start you will need to get permission from your mom to purchase life insurance for her and be the policyowner. She will provide this permission during the application process through her signature.
Proof of insurable interest
Also, you will need proof that you would be at a financial loss and hardship if your mom were to pass away. To determine if insurable interest is present, a life insurance provider will usually investigate the relationship between the proposed individuals by speaking to the policy owner, beneficiary, and the person who is insured.
This exists to stop people from being tempted to purchase a life insurance policy on just anybody to receive profits if that person were to die. Therefore, this proof must be present at the time of application as well as when you submit the claim.
Mom isn’t the only one that can be gifted a life insurance policy. In fact, you can purchase life insurance for anyone who you have consent and proof of insurable interest for. This may include immediate family members such as a child or grandchild, spouse, an employee, and an individual who is dependent on the primary insured person.
Although, it is important to keep in mind that you won’t be able to purchase life insurance for the person at the grocery store you just met yesterday. Remember, you’ll need to prove that if this person were to pass away, you personally would be at a financial loss as a result.
Cover funeral costs
In Canada, the cost of a funeral and burial can be expensive.1 While, costs are impacted by the type of funeral service you decide on and the province you live in, these expenses can add up very quickly.1 By purchasing a life insurance policy for your mom, not only will she have peace of mind but so will you. You’ll be confident that you will be able to financially cover these expenses when the time comes.
Pay off outstanding debts
Another consideration is if your mom has outstanding debts such as unpaid bills, a mortgage or a personal loan that she hasn’t fully paid off. Then life insurance can help you to pay off these debts quicker when she passes away. If suddenly you have a large mortgage debt on your plate it can be overwhelming. It’s better to plan now, so you will be prepared for when you are faced with these costs.
If your mom has dependents that are relying on her financially, then the death benefit from life insurance can support those dependents when she passes away. Is she paying for her children’s university/college expenses? Does your dad also depend on her income? Women’s financial contributions to their families are increasing and as a result their loss can have profound financial impacts on their families.
One of the reasons your mom may not have purchased life insurance before is because she may not be able to afford the premiums. Yet, you may be able to afford the premiums and see a strong need, believing it would be positive for her to have a policy. In this case, you want to purchase the policy for her and insure her under it.
Inheritance or gift for children and grandchildren
Your mom may want to give some money to her children (you and your siblings) or even her grandchildren when she passes away. Life insurance can be an effective way to provide a potentially large monetary gift using her death benefit to her children or grandchildren when she passes away. You can help her to fulfill her wishes by purchasing a life insurance policy for her.
There are a few different life insurance options for you to consider when deciding what policy to purchase for your mom:
Traditional life insurance
This type of life insurance involves a complete medical exam which includes needles, fluid samples and more tests if required. It is fully underwritten, which means it can take anywhere from one to three months for a policy to be issued.
No medical life insurance
Unlike traditional life insurance, this type doesn’t require medical exams or tests (no drawing fluids or needles necessary). As a result, this policy is issued much faster than traditional life insurance.
Whether you go with traditional or a No Medical Life Insurance policy, two options are available – permanent or term life insurance. This will determine how long you will pay premiums, the premiums cost and if your mom will be guaranteed coverage through-out her life or not.
Permanent life insurance
This type of life insurance provides permanent protection with coverage for life. Sometimes there is a cash value component which means if you cancel the policy before the insured dies, then you can receive partial refund of the premiums.
Term life insurance
Term life insurance is when you pay premiums for a fixed amount of time (10, 20, 25, 30 years or for any other period that is defined in the policy). This type of insurance will only pay the death benefit if the insured passes away during the time period (term) you were paying the premiums for. If your mom lives beyond the term and you do not renew the policy then she will not be covered.
The best way to determine how much life insurance coverage to buy for your mom is to consider any financial expenses that will arise when she passes away and any outstanding debts that she may have such as:
- Mortgage/personal loan
- Income replacement
- Children’s education
- Funeral/final expenses
- Estate taxes
Use an insurance calculator to easily get an estimate of the amount of coverage she may need.
If you purchase life insurance for your mom this makes you the policy owner. It’s important to be aware of what happens if the policy owner passes away. In the event that you were to pass away before your mom, the life insurance policy may change. Since you won’t be able to pay premiums, the policy is passed to the contingent owner (if you assigned one) or it will go to your estate. Your mom can be both the policy owner and the insured while having another family member as the payor, if they can justify this arrangement.
Another scenario you should be aware of, is if you cannot pay the premiums, the policy will lapse. Some insurance providers have a grace period to allow you to pay for the policy before it lapses. You can coordinate with another family member to take over the payment responsibilities in the meantime, until you can afford to make payments again.
The application process for purchasing life insurance for your mom is simple and convenient. Once the insurance provider confirms her consent and proof of insurable interest, the application will need to be completed. Your mom will need to be the one to fill out the application.
Give your mom the gift of life insurance this Mother’s Day. Help her to financially protect her loved ones and plan for the future.