Agency Owner, The Thomas G Sheehan Agency, 27 Glen Road Sandy Hook, CT 06482
Yes, it is possible, but there must be a demonstrated insurable interest between the people involved. Here are a couple examples. In a marriage that is simple. Clearly each spouse has an insurable interest in the other as well as any of their children. In a business partnership, such an insurable interest also exists pretty clearly in that all the partners have an equal financial interest in their company. A business may also have a key person without whom it would be difficult to maintain that business. In a case like that the business can purchase coverage on that person.
President, Lane Independent Agency, Southern California
Certainly, but they must have both an insurable interest and inform the insured. Insurable interest is something like having a financial interest in their survival. Say husband/wife, parent child or vice versa, or even former spouse to someone who is paying them for something owed (other than support which would end at death). Thank you. Gary Lane.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
Buying life insurance on unsuspecting third parties was an old form of gambling. It was particularly popular around waterfronts where the prospects of a sailor perishing on a voyage for high. Today the key is, “insurable interest.” This compounded by a requirement that the person being insured cooperates by signing the application, providing a release of medical information and then reciting their medical history. A legal relationship isn't required.
Yes, when someone gets life insurance on someone else, the person who purchased the policy is the policy Owner. The other person whose life is being insured, is called the Insured. It is the Owner who makes the decisions about the policy, such as naming the beneficiary, which bank account to pay the premium from, etc.
Obviously, you would want everything to be above board if you were going to be the Insured in a policy owned by someone else. One reason someone might want to own a policy on someone else's life is if they would suffer a great loss if that person died. E.g. The Insured owed the Owner a great deal of money, and the life insurance policy would repay that debt if the borrower died. Or the Insured owned the home where the policy Owner was living, and that policy would enable the policy owner to purchase the home when the Insured person died. Unless there is a very close family tie, this type of insurable interest in actually required in order to take out a life insurance policy on someone else.
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Obviously, you would want everything to be above board if you were going to be the Insured in a policy owned by someone else. One reason someone might want to own a policy on someone else's life is if they would suffer a great loss if that person died. E.g. The Insured owed the Owner a great deal of money, and the life insurance policy would repay that debt if the borrower died. Or the Insured owned the home where the policy Owner was living, and that policy would enable the policy owner to purchase the home when the Insured person died. Unless there is a very close family tie, this type of insurable interest in actually required in order to take out a life insurance policy on someone else.