Affordable Life Insurance Protection for Your Family
You cannot buy a life insurance policy for a total stranger or anyone else without informing them.
Somebody else cannot purchase a policy on you without your knowledge either.
In other words, consent is needed. They must be aware that you're buying an insurance plan on them and they agree with it.
If you were allowed to buy life insurance on anyone, then many people may insure those who may be near death, who they do not know, and end up taking advantage of insurance companies.
Insurers are not in the business of making people rich, but providing financial security for a risk presented by the loss of someone you have an insurable interest in.
Can I Get Life Insurance on Someone Else?
Yes. If you have an Insurable Interest in the person you wish to insure.
Can I Buy a Life Insurance Policy on a Family Member?
Yes. Family members do have an insurable interest in one another and may be able to purchase life insurance on each other.
Why Buy Life Insurance on Someone Else?
The primary reason for buying other people a life insurance policy is to help protect yourself financially in the event of their death.
One example is you can purchase coverage on your parents to help pay for their final expenses when they pass away; such as, the cost of their funeral and burial expenses.
Other Common Examples May Include:
What are the Requirements to Insure Someone Else for Life Insurance?
Buying insurance policy for other people, such as child, spouse, parents and business partner is possible as long as you have an Insurable Interest and Consent from the Insured Person.
Insurable interest means that you would be negatively affected financially when the insured person passes away.
You cannot buy life insurance on a stranger because that person has no impact on your financial situation. If that person (stranger) dies, you would not be financially affected in a negative way.
Married couples can purchase life insurance on each other because their finances affect one another, should one of them die.
Being related to someone by blood or by marriage does not automatically mean you can buy a life insurance policy on them. To buy insurance coverage on anyone including your family members, you need to prove that their death would negatively impact your finances, you would suffer some financial cost, or loss of financial support.
It is illegal for life insurance carriers to sell insurance policies on people without an insurable interest, when it comes to life insurance.
Insurable interest is required by law to ensure that the death of the insured does not create a personal gain for the insurance policyholder.
Allowing people to be able to own life insurance on anyone they choose may lead to foul play for insurance payouts, which would have a negative impact on the finances of an insurance company.
Approval – Consent
While buying a policy for other people is possible and legal, there are some restrictions to the purchase of coverage.
You cannot buy life insurance on a total stranger or anyone else without informing them of your purchase. Somebody else can’t purchase a policy on you without you knowing about it, either.
In other words, consent is required. They must be aware that you’re buying coverage on them and they agree to it.
For this reason, the person being insured is required to sign a consent form with the life insurance application form.
Why Can’t I Buy Life insurance on Anyone I Choose?
It was at one time possible to buy life insurance in the past on someone without them knowing about your purchase. However, it’s been outlawed throughout the U.S.A.
The reason states outlawed stranger-owned life insurance (STOLI) is that the dangers of these types of life insurance policies are very serious.
Potential for Fraud or Murder
When someone buys insurance coverage on a stranger, he or she has a financial motive for that person to die. There are many instances of murder and strangers recruiting older adults as part of a scam to make money.
The new rules and regulations make it nearly impossible to buy insurance coverage on someone without their consent, because most insurers require a medical examination and signed consent form.
Even simplified issue and guaranteed issue life insurance policies without any health exam require the signature of the insured person.
The life insurance industry is heavily regulated. Having both Insurable Interest and Consent Requirements make it almost impossible for anyone to take advantage of a family or an insurance carrier by creating a fraudulent or criminal death claim.
If someone was able to get a guaranteed issue policy without your permission, this would be considered fraud.
Insurance fraud is a felony, and you could end up in jail. The policy is voidable because it never should have been issued.
The only circumstance in which Insurable Interest and Consent are not needed is when a parent applies to buy life insurance for their child who is a minor.
You may also buy $1,000 to $5,000 of dependent coverage on your spouse or dependent children at work without their consent. These coverages can be added to group life insurance plans for individual employees who are covered through their job.
More and more life insurers are offering additional coverage amounts up to $50,000 on a spouse without their consent, signature or physical exam. Sometimes this is a guaranteed issue life insurance policy offered through your employer as a Payroll Deduction Voluntary Plan.
Who Can I Buy Life Insurance On?
You may be able to purchase a life insurance policy on any of the following:
Buying Life Insurance For Your Children
You don’t need consent to purchase insurance coverage for your child under the age of 18. You will only need their consent if your child is an adult, 18 years or older.
You can purchase a permanent life insurance policy on your child to lock-in your child’s future insurability, and the policy starts accumulating cash value which may be used to take a loan in the future.
If anything happens to your child, you wouldn’t have to worry about how to pay for the final expenses and lost income, while you take time off from your job to grieve the passing of your child.
The less expensive option is to add a child rider to your own individual life insurance policy when you buy your own coverage.
The average cost of a child rider is about $50 per year for $10,000 of insurance coverage, and it will cover each of your children who are under 18 years of age.
A child rider locks-in future insurability. Once your children become older, you can convert the child rider into a small permanent life insurance policy without proving their insurability. By then, you can have the option to transfer the ownership to them, when they reach adulthood.
You can buy life insurance on your adult children with their permission.
Buying Life Insurance on Your Elderly Parents
Sons and daughters can purchase life insurance on their elderly parents. Adult children can buy a policy and become responsible for making premium payments to the insurer, instead of letting their parents struggle to pay the insurance premiums.
Adult Children need insurable interest and parents’ consent to buy insurance coverage on them. Some insurable interests include:
The type of insurance plan you can buy on your parents depends on the age of the insured and their health.
Term life insurance is not available to all ages. You can only purchase term insurance if your parents are less than 75 years old. If your parents are over 75, you may need to buy a whole life insurance policy or guaranteed issue policy.
Guaranteed issue policy cost more than term life, but his policy does not require a medical exam or health questions to be approved.
Buying Life Insurance For Your Spouse
It’s natural to purchase life insurance on your spouse, but you need insurable interest and their consent to buy a life insurance policy on them.
Because most spouses share bank accounts and contribute to bills, insurable interest is apparent between spouses.
Buying life insurance for your spouse will ensure that they don’t go into debt after losing your income, upon your passing, which they are used to. The life insurance payout can also be used to pay for final expenses, pay the mortgage, debts, loans, living expenses, and pay for your children’s education.
Most couples own life insurance on each other aside from their own policy. If your spouse owns a life insurance policy on you and you’re in the middle of a divorce, it will be on your best interest to negotiate a transfer of ownership, so you can make sure the coverage remains In Force.
Buying Life Insurance For Your Significant Other
If you’re unmarried but in a committed relationship, you can still purchase life insurance on each other. You just need to have insurable interest and consent to make a purchase.
If you are engaged and living together, your partner’s death can have a financial impact on you. You can demonstrate insurable interest by proving your finances are joined through common bank accounts, saving accounts, or co-ownership of a home on a mortgage loan.
Other Insurable Interest May Include:
When applying for life insurance on your significant other, use the title "Partner" or "Significant Other" or "Life Partner" instead of "Girlfriend" or "Boyfriend".
Buying Life Insurance For Your Business Partners
Insurable interest also applies for business owners because you have a financial and business relationship.
The death of a Partner or Co-Owner can be detrimental to business success – especially in a small business. Life insurance can keep a company running in case a partner dies.
Business partners can take life insurance policies on each other when a business is formed.
Life insurance on business partners and buy-sell agreements are common ways to reduce risk when co-owning a business with two or more people. This legal document states what would happen when either partner dies.
A buy-sell life insurance policy will help ensure that the company will be able to survive financially if one partner dies unexpectedly, which could immediately impact the financial success of the business.
If the partner dies, the life insurance will pay the other partner the death benefit stated in the insurance policy. Typically, the face amount is equal to each partner’s share (portion or percentage ownership) of the business.
The money will be used to pay off the heirs of the partner that died and keep the business moving forward in the control of the surviving partner of the company.
Buying Life Insurance For Your Key Man
A business may have such a valuable employee, that his death would have dire consequences, for the ongoing success of the company. It could be the CEO, top salesman, or someone with a unique skill set who would be very hard to replace, in the short or long-term.
The business can purchase a policy on the Key Man (Employee or Owner) because they have an insurable interest in that person.
The company owns the insurance policy and pays the premium.
It will also be the beneficiary on the policy. When the key man dies, the life insurance proceeds can be used by the business to recover from any financial setback caused by the death of the key man.
The business could also use the insurance payout to be able to offer a signing bonus to attract the best talent for the position they need to fill to replace the key man who passed away.
Buying Life Insurance For Anyone You
Depend on for Financial Support
You could buy life insurance if you have people providing you the monetary assistance that would impact you financially if you lost it.
It could be anyone, but you may need to prove insurable interest in that person.
Maybe you have a successful adult child that pays your rent, or your ex-spouse is required to make child support payments to you on a monthly basis. Many instances could apply here.
If you can prove that you will have financial difficulty resulting from the death of someone, and you can demonstrate insurable interest, you may be able to purchase a life insurance policy on that person.
How to Get Life Insurance on Other People
Process for purchasing a life insurance policy on someone else:
For traditional life insurance, an applicant will often have to provide the following information:
Finding The Best Life Insurance Plan
To find the best life insurance policy on someone else make sure you compare life insurance plans and pricing from several life insurance providers.
Not all providers assess risk the same way. One insurance company may offer much better pricing than another carrier.
Life Insurance Quotes
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Resources for Buying Life Insurance on Someone Else: