Life insurance for parent?

Legally speaking, in order to insure yourself against a particular risk you need to have an "insurable interest" in that risk. So, I can insure my own home against the risk of fire because, if it does catch fire, I will suffer loss. But I can't insure your home against the risk of fire. At best, this is just me gambling — I am betting that your home will burn down. At worst, it give me an incentive to burn your home down. You can see why, as a society, we wouldn't think that encouraging insurance contracts of this kind was a good idea.

When it comes to life insurance, everyone is assumed to have an insurable interest in their own life, and in the life of their spouse. Beyond that, you can only insure someone's life if their death would cause you (financial) loss. So you can insure the life of your business partner, for example, or of a key employee, or indeed of your employer, since the death of any of these people might adversely impact your earnings.

So, question: what money will the OP lose if their father dies? Obviously there are costs associated with death - funeral, burial, that kind of thing. Plus, if there's a family business in which the father plays a key role, there might be an adverse impact on the business. But as the father is already 71 I am guessing he is retired. And, unless the father is very poor, his funeral etc expenses will be paid out of his estate; the OP won't have to pay them.

So, it might be difficult for the OP to insure his father's life for more than a modest amount. Hence the suggestion that the father should insure his own life, which he can do because he automatically has an insurable interest in his own life. But the suggestion is that the OP would pay the premiums. If the insurers are, or become, aware of this, they may take the view that this is in substance a concealed attempt by the OP to insure the father's life without demonstrating an insurable interest, and they may disclaim the policy. So I would hesitate to do this.

A point already made is that, if we're talking about a 19- or 20-year policy on a man aged 71, death within the term of the policy is odds-on, and the premium will be correspondingly high. Which means that the insurance may not be great value. OP says he was quoted a premium of €295/month. He doesn't say what level of cover that would give, but if he were to invest that amount every month for 20 years, and investment values grew at the rate of 3% a year, my back-of-the-envelope tot is that after twenty years he would have about €87,000, regardless of whether his father dies within the term or not. If he puts the same money into insurance premiums he will presumably get more than that if his father dies (but we don't know how much more) but, if his father is spared to the age of 91, which of course we all hope he will be, the OP will get nothing at all for twenty years of premiums.

So, it comes back to insurable interest. What financial loss does the OP face if his father dies before reaching age 91? If there is no financial loss, why would the OP pay for insurance? Simply investing the same money looks like a more rational course of action.

But you're not an actuary. In terms of your father's life expectancy, an insurer is going to take a more conservative view than you. And charge you accordingly.

Your father's death will not occasion any financial hardship for you and you tell us you could use the money to pay off your mortgage. So what you are proposing is effectively a gamble. The life policy will only pay a profit (death benefit less the premiums you have paid) if your father dies early so you are potentially walking into a moral dilemma whereby the sooner your father dies, the quicker you get to clear your mortgage.

I think it would be more prudent to spend the money by increasing your monthly mortgage payments.

The odds are very rarely never in your favour when it comes to Life Assurance.

In this case, your father will have to answer health questions and be subjected to a health investigation that will set the 'odds' more or less correctly. Your dad - bless him - possibly feels a little bit guilty about a lack of inheritance and is trying to ameliorate that guilt, and also generally trying to think about the unpleasant inevitable.

Perhaps reassure him that you are financially fine, that he has no obligations to you in that area, and encourage him to enjoy his golden years.

Yup. The problem for life assurance companies is that you generally know more about your own health, genetic inheritance and lifestyle than they do. And if you reckon you are going die sooner rather than later, that's an incentive to take out life insurance for the benefit of your nearest and dearest. Conversely, if both your parents and all your grandparents lived to 105 and you yourself are in the pink, you're less motivated to take out life insurance.

So, insurers reckon, in the class of people that insures their own life people, who are at elevated risk of dying are over-represented, and people who are at reduced risk of dying are under-represented. Some of the class are taking out insurance because they know they have a problem, and insurers are constantly trying to develop ways of identifying those people.

The OP recognises the problem. One suggestion is that the policy would be effected by the OP's father on his own life. Of course he has an unlimited insurable interest in his own life, so no problem there. The problem is that the OP is also contemplating the idea that he would reimburse his father for the cost of the premiums, which would be problematic precisely because this would be an attempt to mislead the insurance company about who was really insuring the father's life.