I'd rather take on the debt if needed rather than pay a company to cover the funeral just in case. The life insurance company won't give a policy unless they expect to make a profit, so you must assume you will lose money in the bargain. What you might gain in the bargain is peace of mind, it's up to you whether that is worth the cost. Despite being smokers, if they are only in their 50s they will likely live quite a while yet. And if they are very unhealthy and you think they might die soon, then life insurance will certainly be out of the question. I would ask them directly about their end of life wishes and what savings they have for retirement or other expenses. That is information you should probably know, at least in general. If they don't want to tell you that's fine, but you also don't owe them a fancy funeral that you can't afford, and you probably can't afford life insurance either.
No, their debt does not automatically become your debt. Unless you have a special circumstance, their debt is their debt and you won't be responsible for it.
Long term care insurance is probably a more appropriate consideration, but also probably cost prohibitive.