Typically, you buy life insurance on yourself to financially protect your loved ones in the event of your death.  But can you buy life insurance on someone else?  The only way you can purchase life insurance on another individual is if you have insurable interest and consent.

Life Insurance and Insurable Interest

Insurable interest means that you would be adversely affected financially if the person who is insured died.

In other words, you cannot purchase life insurance on the stranger you met at the grocery store yesterday.  That person has no bearing on your finances.  If that person died, you would not be affected financially.

The reasoning behind requiring insurable interest is so that the death of the insured person does not create personal gain for the policyholder.  Allowing someone to be able to own life insurance on just about anyone could possibly lead to intentional harm.

As an example, married couples can purchase life insurance on one another because each of their finances, most likely, affects the other.  However, being related to someone does not automatically mean you can buy life insurance on them.  To buy life insurance on anyone, even a family member, you still need to prove that their death would negatively impact your finances.

There are occasions in which you can purchase life insurance on an individual even if you are not related.  Many business relationships can be financially protected with life insurance.  Key person life insurance is one example.

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.  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.  To wrap up, 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

Do you have 30 seconds to spare?  Run a quote on your spouse or key business employee today to see how little it may cost to insure them.  The financial impact should they die prematurely without life insurance far out-weighs the policy premiums.

Photo credit to: Visit Lakeland


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