Insurance Broker | Financial Consultant, Lawrence Insurance Consulting, Southern New Jersey
No, you can generally only take out life insurance on yourself or someone who you have a "vested interest" in. This means that you can take out a policy on members of your immediate family members such as your wife, child, or parent. There are ways to structure a life insurance policy to protect ones business interests, although such options are to numerous to discuss in depth without writing a small book here.
You can take out life insurance on anyone with whom you have an insurable interest. This can be established simply by being a close family member, in the US. However, financial insurable interest must exist even with these types of relationships, with most life insurance companies.
E.g. An adult child can take out a small policy on an aging parent because of the the emotional loss that would occur upon the death of the parent. But in order to take out a large policy there must usually be financial loss. I.e. The adult child contributes financially to their parent and are using life insurance to offset that, or their parent contributes financially to them and they would suffer financial loss upon the death of that parent.
You have to have insurable interest on the policy insured and be prepared to justify the amount of life insurance you’re applying for. If there is no insurable interest, i.e. no quantifiable economic interest between you and the proposed policy insured, the application will be denied.
No, you cannot take life insurance on just anyone you please. There would be a windfall for murders and hitmen from their victims. Typically you would insure yourself against a loss for your loved ones and special interests.There is a gateway that must be met called insurable interest in order to take out life insurance on someone. Insurable interest states that you, the beneficiary, would suffer a financial loss or set back if said person were to die. Insurable interests can include a spouse, child, loved one dependent upon your income. a financial institution leading you money or a business partner or business interest. You can never take out a life insurance policy without the insured's knowledge. The insured has to sign and go through the underwriting process, not you.
President, The Firm of Steven H. Kobrin, LUTCF, 6-05 Saddle River Rd #103, Fair Lawn, NJ 07410
As I am sure you have found out, “insurable interest” is the key principle here. But insurable interest ranges far and wide.
Let me share with you some of the more interesting cases I have come across.
For sure, spouses can take out a policy on one another. They are codependent.
I have also seen married men and women take out policies on their lovers. They called that person a domestic partner. This was in addition to having a policy on their marital partner!
Policies on kids are common. It’s tough to think about kids dying, but generations ago it was commonplace to buy a burial policy on a new child. But there is another reason to do so: get a policy on a child so that he or she grows into adulthood already covered. What if unfortunately he has a tough time getting coverage later on, due to a medical condition or other higher risk factor? Maybe he becomes a mountain climber, or a scuba diver, or has a job which requires travel to Third World countries.
He will be really glad you had the foresight to get him a life policy when you did.
I have seen children take out policies on parents. One client dedicated herself to making sure her retired mother lived in style. She bought her a house, paid her monthly expenses, treated her to a new car, and really paid her back for all that generosity Mom had shown her growing up.
Of course, the daughter sacrificed her own retirement money to do so. So I was able to get her life policy on mom to reimburse her.
Then you have policies taken out by businesses on partners and key people. Plus you have charities insuring donors to make sure those contributions keep on coming.
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E.g. An adult child can take out a small policy on an aging parent because of the the emotional loss that would occur upon the death of the parent. But in order to take out a large policy there must usually be financial loss. I.e. The adult child contributes financially to their parent and are using life insurance to offset that, or their parent contributes financially to them and they would suffer financial loss upon the death of that parent.
Let me share with you some of the more interesting cases I have come across.
For sure, spouses can take out a policy on one another. They are codependent.
I have also seen married men and women take out policies on their lovers. They called that person a domestic partner. This was in addition to having a policy on their marital partner!
Policies on kids are common. It’s tough to think about kids dying, but generations ago it was commonplace to buy a burial policy on a new child. But there is another reason to do so: get a policy on a child so that he or she grows into adulthood already covered. What if unfortunately he has a tough time getting coverage later on, due to a medical condition or other higher risk factor? Maybe he becomes a mountain climber, or a scuba diver, or has a job which requires travel to Third World countries.
He will be really glad you had the foresight to get him a life policy when you did.
I have seen children take out policies on parents. One client dedicated herself to making sure her retired mother lived in style. She bought her a house, paid her monthly expenses, treated her to a new car, and really paid her back for all that generosity Mom had shown her growing up.
Of course, the daughter sacrificed her own retirement money to do so. So I was able to get her life policy on mom to reimburse her.
Then you have policies taken out by businesses on partners and key people. Plus you have charities insuring donors to make sure those contributions keep on coming.