Can you buy life insurance on someone else?
Understand the requirements, legal considerations, and insurable interest. Compare quotes from reputable insurance providers and make informed decisions to protect your loved ones. Whether you're considering coverage for a family member, business partner, or co-signer, we provide the answers you need.
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Insurance and Finance Writer
Merriya Valleri is a skilled insurance writer with over a decade of professional writing experience. Merriya has a strong desire to make understanding insurance an easy task while providing readers with accurate and up-to-date information. Merriya has written articles focusing on health, life, and auto insurance. She enjoys working in the insurance field, and is constantly learning in order to ...
Merriya Valleri
Licensed Agent & Financial Advisor
Schimri Yoyo is a financial advisor with active life and health insurance licenses in seven states and over 20 years of experience. During his career, he has held roles at Foresters Financial, Strayer University, Minnesota Life, Securian Financial Services, Delaware Valley Advisors, Bridgemark Wealth Management, and Fidelity. Schimri is an educator eager to assist individuals and families in ...
Schimri Yoyo
Updated January 2025
Are you wondering, “Can you buy life insurance on someone else?” This comprehensive article explores the topic of purchasing life insurance for another person and provides valuable insights.
Discover the legal considerations, insurable interest, and various scenarios where buying life insurance on someone else is applicable.
- Can you buy affordable life insurance on someone else? You can, but you need to get that person’s permission
- There are many legitimate reasons to buy life insurance on another person, including using life insurance benefits to protect against losses
- In most cases, it is unlikely that you can buy a life insurance policy on someone else without them knowing
Whether you’re a parent, a business partner, or a co-signer, we’ve got you covered. To ensure you find the best rates from top insurance providers, enter your zip code and compare quotes using our free tool. Take control of your loved ones’ financial protection today.
Who would want to purchase life insurance on another person?
People who may want a legitimate reason to take out a life insurance policy on someone else include parents, other adult relatives, an adult with aging parents, romantic partners, business partners, and people who co-sign loans.
Buy Life Insurance as a Parent, Grandparent, Aunt, or Uncle
When someone takes out a child life policy — which is most likely a whole life policy — the adult does not stand to benefit. Instead, the child is the one who benefits when they come of age (they turn 18 or older).
Parents can more easily take out life insurance policies on their children, but the parents can permit grandparents or other adult relatives to do the same.
In any case, the insurance company needs a child’s Social Security number and proof that the child named on the policy is reasonably healthy.
Buy Life Insurance as Someone With Aging Parents
Grown children may want to buy life insurance policies for their parents to cover expenses. In most cases, the children will purchase final expense life insurance, which pays for funeral and burial expenses.
In other cases, the children may need to know whether their deceased parents had life insurance policies. There are numerous ways to find that out, and the Insurance Information Institute lists 12. One thing to do is to search insurance-related documents.
If you need to find out if your parents had life insurance policies, you can ask an insurance company directly. However, you will need to provide documentation to prove a claim.
Alternatively, if you have a deceased parent, you can visit the National Association of Insurance Commissioners to locate a life insurance policy. You will need to sign up, however. Another website that can help you is the National Association of Unclaimed Property Administrators.
Buy Life Insurance as a Spouse or Domestic Partner
It is easier for spouses to prove a relationship and insurable interest. Domestic partners may need to answer more questions and provide more information during the underwriting process.
Either couple may have separate policies, but married couples often choose to have joint policies.
In any case, things can get tricky if there is a divorce/split. It can be hard to remove an ex as a beneficiary or to cancel the policy. However, some companies may allow former couples to convert their joint policies into two separate ones.
Buy Life Insurance as a Former Romantic Partner
You might want to have a life insurance policy on your ex-spouse or ex-lover if they owe you alimony or child support.
In many cases, ex-spouses purchase life insurance policies on their own lives under the order of a court. Their exes or a trust for the children are to serve as beneficiaries.
Buy Life Insurance as a Business Partner
If you are in a partnership or other small business, you may want to purchase life insurance policies in a buy-sell agreement.
Some businesses have buy-sell agreements, in which each partner or the business itself buys life insurance policies on each member. If one partner dies, quits, retires, or otherwise cannot continue with the company, their life insurance policy will fund the sale of their shares.
Buy Life Insurance as a Co-Signer of a Loan
If you co-sign a loan, you may need to buy a life insurance policy on the borrower. In this case, you are the beneficiary of the policy. The life insurance policy may protect you from any losses should the borrower die before they can pay off the loan in full.
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Why should you get another person’s or a parent’s permission before taking out a loan on another adult or a child?
It’s not only the best insurance companies that make you get permission to take out a life insurance policy on someone else. Secretly taking out a life insurance policy on another person is likely an act of fraud, which can bring fines and prison time.
Whenever you take out an insurance policy, everything should be above board and you need to have a legitimate reason. Insurance companies want to protect their interests, and making false claims or forging policies poses a risk for those companies.
We hope that we have thoroughly answered the question, “Can you buy life insurance on someone else?” To see quotes from top insurance companies in your area, enter your ZIP code into our free quote tool below.
Case Studies: Buying Life Insurance on Someone Else
Life insurance is an important financial tool that provides protection and financial security to individuals and their loved ones. Typically, individuals purchase life insurance policies on their own lives to ensure their family’s well-being in the event of their death. However, there are situations where one might consider buying life insurance on someone else. Let’s explore a few case studies where individuals have chosen to purchase life insurance policies on another person.
Case Study 1: Parent-Child Life Insurance
In this scenario, Sarah, a mother of two, decided to purchase a life insurance policy on her adult son, John. Sarah wanted to ensure that in the event of John’s unexpected passing, she would have the financial means to cover any outstanding debts, funeral expenses, and provide financial support for her grandchildren. By buying life insurance on her son, Sarah aimed to protect her own financial stability and secure the future of her family.
Case Study 2: Business Partnership Life Insurance
In this case, David and Mark were business partners who jointly owned a successful company. They recognized the significance of their partnership and the potential financial risks associated with the loss of one partner. To mitigate these risks, they decided to purchase life insurance policies on each other. By doing so, they ensured that in the event of either partner’s untimely death, the surviving partner would receive the insurance proceeds, helping to cover any financial obligations and sustain the business operations.
Case Study 3: Key Employee Life Insurance
In this example, ABC Corporation identified a key employee, Rachel, who played a critical role in the company’s success. Rachel possessed specialized skills and knowledge that were essential to the company’s operations and growth. To safeguard the business against the potential loss of Rachel, the company purchased a life insurance policy on her. This policy aimed to provide financial resources to the company in the event of Rachel’s death, enabling them to hire and train a suitable replacement and maintain business continuity.
Case Study 4: Charitable Giving Life Insurance
In this particular case, Jack, a wealthy philanthropist, desired to leave a substantial donation to a charitable organization upon his death. However, Jack had already allocated his assets for other purposes and did not have significant liquid funds available. To fulfill his philanthropic goals, Jack purchased a life insurance policy on himself, designating the charitable organization as the beneficiary. This way, upon his passing, the organization would receive the insurance proceeds, allowing Jack’s charitable aspirations to be realized.
Frequently Asked Questions
What is an “insurable interest?”
An insurable interest is a financial stake in another person’s life, such as a spouse, business partner, or parent of a minor child. This is a requirement for purchasing a life insurance policy on someone else.
Can I purchase a life insurance policy on a friend or family member?
Yes, you can purchase a life insurance policy on a friend or family member as long as you have an insurable interest in that person.
How do I go about purchasing a life insurance policy on someone else?
You would need to contact an insurance agent or company and explain that you have an insurable interest in the person for whom you wish to buy the policy. The person for whom you are buying the policy may need to provide consent and may need to undergo a medical examination.
Can the person for whom I’m buying the policy cancel it at any time?
No, the person for whom you are buying the policy does not have the right to cancel it. However, they can choose to no longer pay the premiums, which will cause the policy to lapse.
What happens if the person for whom I’m buying the policy passes away?
If the person for whom you bought the policy passes away, the death benefit will be paid out to the beneficiary you designated when you purchased the policy.
Are there any restrictions on the amount of life insurance I can purchase on someone else?
Yes, the amount of life insurance you can purchase on someone else is typically limited to their income, debts, and other financial obligations, as well as the amount of insurable interest you have in that person.
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