A recipient of insurance payments generally doesn't pay income tax on the payment. If the payment is invested and earns income or otherwise gains value, someone has to pay tax on that income.
CDs are certainly safe but very low yield. Whether that is the best investment choice is a question for an investment advisor considering your risk tolerance and investment goals.
I don't think the IRS cares who pays tax on the interest as long as someone does. If you are a joint legal owner of the money, then you are jointly liable for the income tax on the interest earned, even if your SSN is not on the account. The fact that your parent's SSNs would be on the accounts means that the 1099-INT forms will be issued in their names and they will probably pay the tax on those interest earnings. But leaving your SSN off the account does not absolve you of the responsibility of paying the tax if for some reason your parents' don't. The IRS could come after both owners. (But the IRS won't have any reason to look at you as long as your parents do report the income and pay the tax.)
Whether to open 1 CD or 2 is also a matter for an investment advisor or legal advisor. If it was me, I would not want to make my ex-spouse a co-owner of my money -- too many possible complications down the road. I would suggest two separate accounts for the two parents.
