07/25/2023
How to get a life insurance policy on someone
If secretly taking out a life insurance policy on someone else shortly before that person meets with an untimely end seems like something that only happens in the movies, you’d be right. Insurers won’t let you buy a policy for another adult without that person’s knowledge.
That doesn’t mean purchasing life insurance on someone else is entirely off the table. It is legal to buy life insurance on another person in certain situations. And it can make sense to do so—without being the least bit underhanded.
How to Take Out Life Insurance on Someone Else
You can’t take out a life insurance policy on a stranger or even someone you just casually know. “You have to have an insurable interest in that person,” says Dennis LaVoy, founder of Telos Financial in Michigan. That’s one of the requirements for buying a policy for someone else. The other is consent.
Insurable interest: To buy a policy for someone else, you need to be able to show the life insurance company that you would suffer financially if that person died. To put it bluntly, insurers don’t want to incentivize someone to shorten someone else’s life. So they want to see that you benefit from that person being alive, LaVoy says.
Consent from the insured: The person on whom you are buying the policy—the insured—must be involved in the application process. He or she will have to go through the underwriting process, which involves answering questions and, in most cases, taking a life insurance medical exam. The insured will also have to sign the application, LaVoy says. The exception to this rule is if you’re buying life insurance for a child (more on that below).
