Something you should never do with life insurance

Earlier this month, I wrote a post about investing in life insurance if you have a family.

http://strategicalliving.blogspot.com/2014/05/how-to-create-legacy-make-your-children.html

If you have a family, life insurance is a good idea. However, I thought about different possibilities available with life insurance.

One idea that I had was to purchase a life insurance policy on my parents and pay the premiums myself until their passing and collect the death benefit.

This is a very terrible idea, I would not recommend people to do this.
Most people would jump to ethical reasons why not to do this, but there are two much more important reasons.

1. It's probably not legal. I don't know this for sure, consult with a lawyer if you want to.

The much more important reason is that

2. It's most likely not worth it.

If you think of this idea, it is fair to assume that you are in your 20's, 30's, or 40's and your parents do not have any sort of life insurance. Your parents may be in their 40's, 50's, and 60's.

Insurance companies aren't stupid, they hire actuaries to assess risks. They have to make money.

If you decide to buy a policy for your father, it is very likely that the premiums paid over the remainder of his life will outweigh the amount of the death benefit. If you do come out ahead, the return may be reduced to the point that your investment would have been better placed somewhere else.

A few months ago, my father proposed the idea to me. I had to point out why this was a bad idea.

The only way I can see this strategy would benefit someone is if their parents really did die in an accident within maybe 10 to 20 years. In that case, the death benefit would most likely outweigh the cost of your premiums.

Since doing this is similar to betting on forces that you cannot control, I would never recommend doing this.