Struggling to find a meaningful gift for your family for the holidays? Sometimes a gift card or a souvenir is great, but giving a gift that is meaningful and provides a long-term benefit to your family will go far beyond what you can express in a standard holiday card.
Instead of small gifts that fail to hold significant value, consider filling a gap that your loved ones might be facing. According to the Life Insurance Marketing and Research Association (LIMRA), the number one reason why Americans don’t have life insurance coverage is because they can’t afford it. If you find that your family members are falling into this statistic, it might be time to give the gift of life insurance. Not only will you be able to provide for a loved one for many years, but you can live peacefully knowing that they are protected in case something ever happens.
Can Life Insurance Policies Be Gifted?
Yes! With life insurance policies, the owner and the insured individual do not need to be the same person. This means you can purchase coverage for someone else, whether it be for your parents, your children, other relatives, or partners. Giving a life insurance policy is a great idea for the upcoming holidays, but they also make excellent gifts for graduations, birthdays, or life-long milestones.
Life insurance provides an array of benefits, so it makes sense to want to provide these benefits for loved ones outside of your own policy. By gifting life insurance, you have an opportunity to make a lasting impact on the wellbeing of your loved ones.
Benefits of Purchasing a Life Insurance Policy as a Gift
While everyone should strive to have their own life insurance policy, this isn’t always feasible. Giving the gift of life insurance will help keep others close to you protected if they are not able to obtain their own coverage. Here are a few of the benefits of giving life insurance as a gift to someone else.
- Peace of Mind: We can’t pinpoint exactly when accidents occur, but we can stay prepared in case anything goes awry in life. To keep our loved ones financially covered in difficult times, it’s important that they have a policy that can support them. If your family does not have a life insurance policy of their own, the thought of something dreadful happening can be daunting. By giving a life insurance policy, not only will you be helping your family in a meaningful way, but you can tame some of those stressful thoughts that you might be experiencing.
- Guaranteed Coverage: Depending on the amount of coverage needed and the health of the individual, gaining approval for a life insurance policy can be difficult. Underwriting determines whether or not someone is eligible for coverage, but this process can be time-consuming and doesn’t guarantee a positive outcome. Instead, the recipient of a life insurance policy will already have coverage in case their health declines in the future.
- Financial Security: Life insurance policies can have benefits outside of end-of-life care or death benefits. Participating policies have dividends which pay cash amounts to the policyholder, and they can use that money as they please. Policyholders might choose to use the money to pay off debt, pay tuition fees, or save for retirement. Please be aware that dividends are not guaranteed and the amounts are determined by the performance of the insurance provider that year.
5 Steps to Give the Gift of Life Insurance
In order to purchase a life insurance product for someone else, there are a few steps that you’ll need to complete first. With every insurance provider this process will look a little bit different. Make sure to speak with an insurance agent to have a more detailed look at the steps you need to take in order to give life insurance as a gift.
1. Compare Products
There are all kinds of life insurance products available today. Whole life insurance provides coverage up until the policyholder passes away, but this policy type tends to have higher premiums with significant benefits, like death benefits or dividends. On the other hand, term life insurance has low premiums but only provides coverage for a set number of years. It’s important to know what you are looking for out of a life insurance policy and work with an insurance agent who will find a product that meets your recipient’s needs while fitting into your budget.
2. Obtain Consent
Unfortunately, giving life insurance as a gift can’t always be treated as a fun holiday surprise. You’ll need the approval of the person whom you would like to purchase a policy for before actually obtaining the contract. When asking for their consent, this is also a great time to request other important information for the policy, such as contact information, date of birth, and their Social Security Number.
3. Demonstrate Insurable Interest
To purchase a life insurance policy on behalf of someone else, you must demonstrate insurable interest in that person. This means that you would need to provide that you would experience financial hardships as a result of the death of the insured individual. By completing this process, you are acknowledging the risk of being a policyowner for a different insured person.
4. Register the Policy
Before they can be covered by the policy you wish to purchase, the insured person might need to undergo underwriting processes. This often includes a medical exam and a review of their medical history to determine how much coverage will likely be needed. There are also options for accelerated underwriting in accordance with how healthy the recipient of the policy is. Once this is completed and all approvals have been obtained, the policy can be purchased.
5. Pay Premiums
If you are giving life insurance as a gift, you might also be expected to pay the premiums on that policy. These payments will need to be made regularly, often on a monthly basis, in order to keep the policy active.
However, some policies may have “lump sum” payment options where you only need to make a single large payment. This may be useful if you want to treat the insurance as a one-and-done expense. Be sure to ask your insurance agent if such policies are available and what the one-time payment cost would be.
Gift Your Own Life Insurance Policy
Perhaps you want your family to reap the benefits of the life insurance policy that you currently have. Fortunately, you can do this by gifting your own life insurance policy. There are two ways that you can accomplish this.
First, you can identify the person who you would like to give your policy to as a beneficiary. Many life insurance products have death benefits which can provide some financial coverage after the policyowner has passed away. While the policyowner is still living, they can add beneficiaries or designate alternative ones to their liking.
Alternatively, some people choose to transfer the ownership of their existing policy onto someone else. According to your insurance provider, you may be able to continue to pay premiums while there is a new owner on the policy.
This way, you can give the policy as a gift and, after the original policyholder has passed away, the new recipient can still receive the benefits of that insurance policy. The new owner will also be able to make any adjustments to the policy, like identifying new beneficiaries or adding riders.
Work with an ELCO Agent to Gift a Life Insurance Policy
The holidays are quickly approaching, so be sure to start your research early if you plan to give life insurance as a gift. Luckily, ELCO Mutual’s independent insurance agents are available to provide more information on life insurance policies as gifts.
To get started or find out more about the life insurance products from ELCO, reach outu to our team today!
