Can anyone buy life insurance?


You can’t take out a life insurance policy on just anyone, but there are situations where you can take out a life insurance policy on someone other than yourself. Life insurance is a financial planning tool that makes a payment to named beneficiaries after the death of the insured. Most people buy a policy to help them plan for death and to give their dependents and loved ones a financial cushion.

However, there are times when someone may want to purchase a life insurance policy for someone other than themselves. While there are options available for doing this, there are also guidelines that should be followed before purchasing a policy on anyone other than yourself.

How a life insurance policy works

When buying life insurance, three parties are involved:

  • Insured: The policyholder is the owner of the policy, pays the premiums and can make changes.
  • Insured: This is the person whose life is assured. The policy death benefit will be paid on the death of that person, if the death occurs during the term of the policy.
  • Beneficiary: This is the person (s) listed on the life insurance policy who will receive the death benefit on the death of the insured. Beneficiaries can also be trusts, estates or organizations.

Often, the insured and the policyholder are the same person. However, there are situations where someone may want to purchase a life insurance policy on another person. Bankrate’s insurance editorial team has done research to help you understand the process of purchasing a life insurance policy on someone else.

Can we take out life insurance on anyone?

No. To buy life insurance on a person, you must have a financial interest in their life. It is not possible to take out life insurance against a sick public figure or an athlete in a high-risk sport. Gambling against someone’s life is not only unethical, it also doesn’t make financial sense for life insurance providers.

It is only possible to purchase life insurance on someone else if there is a relationship between you, such as a business partner, spouse or parent – and only if the insured person consents to a policy of life insurance is taken out for her.

Life insurance companies also require that the relationship pass the “insurable interest” test, which means that it must be shown that the death of the insured would have a negative impact on the person who wishes to purchase the policy. .

Who can I purchase life insurance from?

You may be able to purchase a life insurance policy on another person if you have the following relationships, as long as you suffer financial loss in the event of death:

  • Adult child
  • Associate
  • Child
  • Former spouse or life partner
  • Grand parent
  • Parent
  • Brother and sister
  • Spouse or life partner

However, you must be able to demonstrate that the person’s earning potential has an impact on your life. You probably won’t be able to purchase a policy for a friend whose finances aren’t affecting your life. But you can probably get a policy on a spouse, whose income you depend on. Keep in mind that you will need the person’s permission to purchase a life insurance policy.

How to buy life insurance for someone else

While each insurance company’s underwriting processes are different, there are a few common steps you will need to take when purchasing life insurance for someone else.

Select a type of life insurance policy

The first decision is whether permanent or temporary coverage is necessary. Term life insurance is generally less expensive than permanent life insurance and is a temporary solution for a period of 10, 20 or 30 years. Whole life insurance or universal life insurance, which are types of permanent life insurance, stay in effect as long as premiums are paid and are cash value that can also be used to borrow or withdraw money. .

Get quotes

Whatever type of life insurance coverage you need, it’s a good idea to seek quotes from multiple life insurance companies to find the best price and terms. The price of the same type of coverage may vary from carrier to carrier.

Get permission

Once it’s time to apply, the next step is to get permission from the person you plan to insure. They will need to sign a consent form and likely undergo a medical exam before the policy is approved. Even if a policy that does not require a medical examination is selected, failure to obtain the signed consent of the person for whom you are purchasing the policy could be considered insurance fraud.

Prove that you have an insurable interest

You have an insurable interest in a person’s death if you suffer a financial loss on their death. If you do not have an insurable interest in someone, you cannot purchase a life insurance policy on that person.

Most family relationships are easily proven by checking medical or personal history and interviewing the insured. However, in cases such as business partnerships, life partnerships, and non-legally binding relationships, proof of insurable interest may be required. This could include health care documents or other proof of life partnership, business contracts or other documents to prove the relationship and that there is an insurable interest between the policyholder and the insured.

When to buy life insurance for someone else

There are certain circumstances that make buying a life insurance policy for someone else a sound financial decision.

Protect family members financially

For people who are raising children together and who own assets such as a house, a life insurance policy could compensate for lost income if one of them dies. A life insurance policy on an aging relative could provide money to pay off debts left behind or cover funeral costs. And families with higher net worth may consider life insurance to pay for inheritance taxes.

Ensure business continuity

The death of key associates or employees can sometimes endanger a business. While a life insurance payment may not replace an individual’s skills and knowledge, it could provide capital to recruit a replacement or cover critical costs as the business adapts.

Guaranteed future coverage

Some families have a history of genetic and chronic illnesses that make it difficult to obtain life insurance coverage. A permanent life insurance policy for a child or young adult purchased while they are still in good health guarantees coverage, even if they are diagnosed with a health problem in the future.

Frequently Asked Questions

Can You Buy Life Insurance For Anyone?

You can only purchase life insurance from a consenting person in whom you have an insurable interest. You will need them to sign the policy and prove that their death could have a financial impact on you.

How to choose the best life insurance?

To choose the best life insurance policy, decide what type of coverage is needed and search for multiple quotes. Getting quotes from several different life insurance companies could help you find the type of policy, terms, and premium that suit your needs.

What does life insurance cover?

Life insurance covers many things, but is primarily intended to help financially protect the beneficiaries of the policy upon the death of the policyholder. Things like expired policies, fraud, criminal activity and some exclusions described by insurance companies are not covered.

Who needs life insurance?

Anyone concerned about what will happen after their death can consider life insurance. Those who are worried about leaving loved ones with a financial burden, like debt or burial costs, might also consider life insurance.


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