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Can You Buy Life Insurance on Someone Else?

Can You Buy Life Insurance on Someone Else’s Life? What You Need to Know in [2024] 

Can I buy life insurance coverage for another person? The answer is yes you can as long as you have an insurable interest and consent.

The question of purchasing life insurance on someone else’s life has been raisedcan you buy life insurance on someone else frequently, with some suggesting it may indicate suspicion of wrongdoing.

In most cases many people believe that the insured individual named on a life insurance policy must also be the policyholder.

Often times this assumption is not the case, but you can purchase life insurance that pays the face amount concluding the death of someone else if all the guidelines are followed correctly.

Purchasing life insurance on someone else, such as an adult, is possible if the potential insured authorizes legal consent and you have an insurable interest.

Having an insurable interest would mean you would encounter a financial loss if the individual in question loses his or her life. Keep reading and we will provide answers to all your questions in more detail.

 

Why Would You Consider Buying Life Insurance for Another Individual

The most common reason for a person to purchase life insurance for someone else would be in the simple case of loss of income due to the death of a person’s spouse. These types of conditions are the most common and these applications are processed everyday.

Also purchasing a policy for one’s children is also quite common. These policies are not normally intended to cover the loss of income for a child but provide a child with a policy at extremely low rates to be used many years down the road which you could look at as planning ahead. 

There will be many reasons you could have to insure another person’s life but the proper conditions have to be met to make this happen. Just keep in mind that life insurance companies watch this type of activity very closely and they will not accept an application that does not look ethical.

 

Common Reasons to Insure Another Individual’s Life

Business Ownership –

If you own a business, it is common to buy life insurance on a business partner or a Key Employee. If the business partner dies, his life insurance would pay the death benefit to you so you would be able to buy out your partners interest in the company.

If a key employee dies, it may cause a great financial loss to lose this employee that is crucial to the company’s existence.

Financial Dependency – 

If you are dependent on another individual such as a former spouse where there are existing alimony payments or child support payments involved, life insurance would pay off to cover your financial support after their passing.

Family Support – 

Parents often buy life insurance for their married offspring to ensure financial assistance for their grandkids. If their married children do not have life insurance or sufficient life insurance, this will be a way to guarantee a financial safety net for the dependent youngsters and peace of mind for the grandparents that their grand kids will always be financially secure.

Parental Care –

The parental care that I am referring to is relevant to adult children deciding to take out life insurance on their aging parents. You will not be able to apply for a high face amount on your parents lives unless you can prove why this amount is necessary.

If you decide to purchase funeral insurance, otherwise known as final expense insurance, you won’t have an issue because this is considered a common practice. 

 

What Is Insurable Interest?

Insurable interest is a key ingredient that must exist when considering purchasing life insurance on another individual’s life. This is not very important when purchasing life insurance for your spouse or children in a normal situation, but if you are planning life insurance for someone outside of the family, you have to show the possibility of suffering a financial loss if they were to die.

The policy face amount would also have to reveal the actual degree of financial loss. An example would be taking out a two million dollar life insurance policy on someone whose death would cause you to suffer a $50,000 loss. The whole concept is to cover you for the loss but not generate a considerable profit to make you wealthy.

Insurable interest could also be viewed as your dependence on your proposed insured’s income or where you have acted as a cosigner for loans or any other debt you could be held responsible for.

 

What Is the Meaning of Consent?

Consent is also mandatory when considering purchasing life insurance on another individual’s life. The person you’re considering buying life insurance for must give their consent which means giving you the authorization for you to insure them.

You cannot apply for a life insurance policy on someone else without first informing them and legally obtaining their permission to do so. Without getting consent from the intended insured, you will be committing an act of fraud which is a felony and punishable by imprisonment.

Insurance carriers would require a consent form before approving an application for someone’s life outside of your immediate family. Just keep in mind that this intended insured would be very active in the application process due to telephone interviews with the carriers and the paramed nurse doing the medical exam just for example. 

 

Common Life Insurance Policies

You have a large selection of policies that you can use when purchasing life insurance on another person’s life but here are the big three.

Term Life Insurance –

 Term life insurance is by far the most common choice by far due to the fact it has the lowest premiums. Whether you will need it for the short term or long term needs, term life insurance will usually be your best choice.

If you are going to purchase life insurance for an elderly person, a permanent form of life insurance is usually the most practical because you don’t know how long it will need to be in force.

Whole life insurance –

Whole Life Insurance is a cash value life insurance plan designed to have a guaranteed degree of financial growth. This is usually best for times where you cannot simply determine how long you will need it.

Whole life is also the most costly form of life insurance. Many life insurance companies do not sell it anymore due to exactly that reason.

Universal Life Insurance –

Universal life is a permanent form of life insurance that increases in value at a fixed interest rate and is initially designed to have flexible premiums instead of a fixed monthly premium. You can also purchase universal life insurance that does not have any interest rate at all, such as with Protective Life from Alabama.

These types of policies have lower premiums and in my opinion are the best choice in the universal life family.

 

In Conclusion

Now you have it, you should be able to understand the principles of how and when you can apply for life insurance on someone else’s life. It’s not complicated at all and is more common sense than anything else. If you have any questions concerning this blog post or anything related to life insurance in general, please let us know.

Thank you for taking the time to read this article. I hope this has answered all your questions.

All the best,

Jack Venturi

Should you have any questions or need further assistance, please don’t hesitate to call us at 815-390-7545 for an immediate response. We’re here to help!

 

Jack Venturi Independent Life Insurance Agent

Jack Venturi

Independent agent and founder of BestChoiceLifeInsurance.com

Jack Venturi has over 30 years of experience educating and helping people find the best life insurance products at the lowest possible premiums over the phone (815)-390-7545 and online.

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