Financial protection may be a reason for purchasing life insurance. A life insurance policy may help financially protect you or a loved one in the event that the insured person dies.
1 Generally, life insurance policies are purchased by the person who wants their life insured, but it is possible for a life insurance policy to be taken out on someone else. This is a possibility when there is proof that you have an insurable interest in a person’s life.
2 For example, you could purchase a life insurance policy on your spouse, grandparent, or even a business partner, as long as you can prove that you would suffer financially if those people passed away.
3
In all of these situations, the consent of the person being insured is required. The insured person needs to be involved in the life insurance application process, which includes providing their signature on the application.
4 So, while you can’t take out a life insurance policy on someone else without their knowledge or consent, there are instances where it might be appropriate to take out a life insurance policy on someone else.
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“Generally, life insurance policies are purchased by the person who wants their life insured, but it is possible for a life insurance policy to be taken out on someone else.”
In some families, a sibling might be caring for an ailing parent or both parents. If that sibling were to die, the parents may need someone else to care for them. By purchasing a life insurance policy for this sibling, it could cover the cost of hiring caretakers for the parents.
4
Another possibility is purchasing a life insurance policy on the life of your parents. Taking out a life insurance policy on parents could help pay final expenses and funeral costs, or it could pay off debts and remaining medical bills they might leave.
5 It could even assist in putting their grandchildren through college.
5
Parents or legal guardians can purchase life insurance on their children and may choose to do so for various reasons. One reason may be to provide assurance that if the child develops a health condition later in life, the child will still be insured.
4 In addition, if the child dies, the life insurance policy could cover funeral or burial expenses that could cost thousands of dollars.
6 Some might decide to take out a life insurance policy on their child to teach them financial responsibility, since policy ownership typically transfers to the child at age 21.
6
These are just a few scenarios where a life insurance policy can be taken out on someone else. When it comes to financial protection, it’s important to understand what’s right for you and your loved ones.
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Sources:
- Content.naic.org, Life Insurance, 2021
- Content.naic.org, Life Insurance, accessed May 2022
- Bankrate.com, Can you take a life insurance policy out on anyone, 2021
- Forbes.com, Can You Take Out Life Insurance On Someone Else?, 2021
- Forbes.com, Do Your Parents Need Life Insurance?, 2022
- iii.org, Should I buy life insurance on my child’s life?, accessed May 2022
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