Can You Get a Life Insurance Policy on Someone Else?

Can You Get a Life Insurance Policy on Someone Else?

Insurable Interest Requirement

To get a life insurance policy on someone else, you must prove to the insurance provider that you have an insurable interest in the person whose life you’re insuring. This often means that you would suffer a financial loss if the insured person dies. For example, if their death would result in a loss of income for you, then you might have an insurable interest.

Insurable interest also may apply if you have a close legal or blood relationship with someone, such as by marriage or birth.

Since you must have an insurable interest in the insured, you can’t arbitrarily get a life insurance policy on anyone you want. Otherwise, someone might take out a life insurance policy on anyone they think would die before them and name themselves as the beneficiary.

Here are a few examples of how insurable interest can play out:

  • Insurable interest in yourself. Everyone has an insurable interest in their own life and can take out a policy in which they’re the insured.
  • Insurable interest in your spouse. When you’re married, you’re related by law and generally considered to have an insurable interest in your spouse.
  • Insurable interest in parents. You may have an insurable interest in your parents and be able to take out a policy on them if you’re an adult. But you’ll probably need to prove to the insurance company that an insurable interest exists. 
  • Insurable interest in a business partner. Business partners often have an insurable interest in each other. If anything happens to either, the business could experience disruption that could lead to financial loss. Insurers frequently issue insurance policies for one business owner on the other.

The owner of an insurance policy can generally change the beneficiaries at their discretion. But the insured person can’t be changed once the policy is issued. 

If you have an insurable interest in someone who is averse to buying their own policy, you might be able to buy a policy on them instead. But you’ll need their consent to do so. Considering their reasons for not wanting to buy a policy could make it easier to get that consent.

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Can secret policies be purchased without the other person knowing?

Picture the scene as you’ve probably seen in many movies. A murder detective shaking their head after finding the victim, sadly proclaiming, “We found out that just last month, he took out a $1 million life insurance policy on his wife without her knowing.”

This stuff makes for good drama television but it’s hardly reality. Since consent is required and often a medical exam, it’s just not feasible to buy a life insurance policy on another person without them knowing.

On the flip side, you can take comfort that nobody is out there buying secret policies on your own life and waiting to profit from your demise.

Transferring of Life Insurance Policies

It is legal to transfer the ownership of a life insurance policy. You can even transfer it to someone that does NOT have an insurable interest.

The 1911 supreme court decision (Grisby vs. Russell) states that a policy owner may transfer ownership of a life insurance policy to a 3rd party even if that 3rd party has no insurable interest. This paved the way for the life insurance settlement market.

This is possible because there WAS insurable interest at the time of the initial policy going in force. As we’ve discussed above, if there wasn’t, there would be no policy.

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What Happens When You Purchase Life Insurance on Someone Else?

When you take out a life insurance policy on someone, the insurance company needs to review the insured person’s health history and other details. To complete that task, the individual being insured will need to answer some basic questions and may need to undergo a medical exam. The proposed insured will need to sign the application to confirm the health history provided and to consent to insurance coverage on his or her life. So, while you can likely purchase life insurance on anybody you have an insurable interest in, you also need their participation to purchase the policy.

How can you find out if someone has a life insurance policy on you?

As long as you’re an adult, no one can take a life insurance policy out on you without your permission. Even your spouse needs your signed consent.

Who can you take out a life insurance policy on?

You may be able to take out a life insurance policy on someone else if you have the following relationships, as long as you would suffer a financial loss if they passed away:

  • Adult child
  • Business partner
  • Child
  • Former spouse or life partner
  • Grandparent
  • Minor child (under age 18)
  • Parent
  • Sibling
  • Spouse or life partner

However, you must be able to demonstrate that the person’s earning potential impacts your life. For example, you likely will not be able to take out a policy on a friend whose finances do not have any affect on your life. But you probably can take out a policy on a spouse, whose income you rely on. Keep in mind that you will need the person’s permission to take out a life insurance policy on them.

Can I Take Out a Policy on Anyone?

You’re pretty restricted on who you can purchase life insurance for. That’s because insurance companies require you to have an “insurable interest” in whoever you want to cover.

“With insurable interest, you need to have proof that you would suffer financially if the person were no longer alive. There has to be that connection that there will be financial consequences,” Mahoney says. 

If paying your aging parents’ final expenses would be financially tough for you, that could be insurable interest. Same goes if your sibling has put you down as a preferred guardian for your nieces or nephews in their will. You could also have insurable interest in a business partner.

Life insurance companies should tell you what kind of proof they need to verify insurable interest. Generally, expect to hear that the person you’re covering needs to be a close family member, romantic partner or business partner. 

In other words, you can’t just take out an insurance policy on Taylor Swift (or, you know, someone who’s just an acquaintance in your life) and name yourself as a beneficiary. 

Can You Purchase Life Insurance on Someone Without Them Knowing?

No, life insurance companies won’t provide coverage for someone without their knowledge. The person being covered by the policy must play a role in the application process. In addition, the person usually must sign the application. Children are the one exception. You can purchase a life insurance policy for a minor child who’s your dependent without their signature or consent.

Who Can You Take Out Life Insurance On?

A traditional use of life insurance is to help protect a family against financial hardship after the loss of a parent, whether the parent earns income or not. However, life insurance could be useful in a variety of other situations. The underlying concept is the same: If someone dies, survivors are likely to experience financial challenges and other complications. Money from a life insurance death benefit can help survivors reduce the financial impact.

While people traditionally purchase a policy for themselves or a spouse to help benefit their immediate family, you can also purchase a life insurance policy on other people. Can you take out a life insurance policy on anyone you see on the street? No, but you might be able to buy life insurance on people who affect you and your loved ones.

Life Insurance and Consent

Not only do you need to prove insurable interest to buy life insurance on someone, you also need their consent.

It would be nearly impossible to buy life insurance on someone without them knowing because most insurance companies will require a medical exam from the insured person.

Even policies that do not require an exam would need the signature of the insured.

The only situation in which insurable interest and consent are not needed is if parents apply to purchase life insurance on their minor child.

If someone does manage to purchase life insurance on another person without their consent, this is insurance fraud. It is very difficult to do so, however, because of all the legalities involved when applying for life insurance.

» Learn more: Can Someone Buy Life Insurance on Me Without My Consent?

To summarize, there are obstacles in place to prevent someone with possible ill-intentions from purchasing a life insurance policy on you:

  • Insurable Interest
  • Medical Exams
  • Consent Forms

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Frequently asked questions

Can you buy life insurance for anyone?

You can only buy life insurance on someone that consents and in whom you have an insurable interest. You’ll need them to sign off on the policy and prove that their death could have a financial impact on you.

How do I choose the best life insurance?

To choose the best life insurance policy, decide what kind of coverage is necessary and shop around for multiple quotes. Getting quotes from several different life insurance companies could help you find the policy type, terms and premium that fits your needs.

What factors are most important when choosing a life insurer?

When selecting a life insurance carrier, there are several important factors to consider, according to the Triple-I. These factors include the company’s financial stability, market reputation, claims-paying record, product offerings and premium price.

What does life insurance cover?

Life insurance covers many things but is primarily intended to help financially protect beneficiaries of the policy upon the policyholder’s death. Expired policies, failure to pay premium, fraud, criminal activity and certain exclusions outlined within the policy can lead to nonpayment of the death benefit.

Who needs life insurance?

Anyone concerned with what will happen after they pass away may want to consider life insurance. Those who worry about leaving loved ones with a financial burden, such as mortgage payments, auto loans, credit card balances, college tuition or burial costs, might also consider life insurance.

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