Life Insurance: Can Someone Else Purchase It For You?

It is possible to buy life insurance for someone else, but there are several important factors to consider. Firstly, the person being insured must consent to the policy and be involved in the application process, including signing the application and undergoing a medical exam. Secondly, the buyer must prove 'insurable interest', i.e., that they would suffer a financial loss if the insured person died. This typically applies to spouses, business partners, parents, and children. Finally, the buyer should carefully consider the tax, ethical, and financial implications of the policy.

Spouse or life partner

If you are married or in a civil partnership, you can insure each other using a joint life insurance policy, and there is no need to prove insurable interest. The money will go to the surviving partner. However, if you want to be the only owner of the policy on your spouse's life, you will need to consult a financial advisor.

In the case of an ex-spouse or civil partner, insurable interest will be required. Any policies you had before you separated can be kept unless you cancel them.

It is important to note that insurable interest is only required when the life insurance policy is first secured. Beneficiaries can be changed, and ownership can be passed on once the policy is established.

Spouses are always considered to have an insurable interest in each other since one would likely have to settle final expenses for the other. If one spouse is a major breadwinner, their passing would be a financial blow, and buying life insurance to cover such a contribution is a natural protective step.

The contribution of a stay-at-home partner who may not be in the workforce should also be considered. For example, a stay-at-home parent or a partner staying at home to care for an ageing loved one. While the financial value of these contributions may differ from household to household, a 2019 survey found that stay-at-home parents would earn nearly $178,200 per year in the workplace.

Divorce decrees often involve life insurance to cover alimony obligations should one of the parties pass away.

Business partner

If you own and operate a business with a partner, you can take out a policy on your business partner, called key person insurance. This would help you continue to operate the business in their absence.

To take out a life insurance policy on a business partner, you must have their consent and prove that you have an "insurable interest". Insurable interest means that you can prove to an insurance provider that it would be financially harmful to you if the person you aim to take a policy out for passes away. In other words, you must prove that you rely on your business partner while they are alive and would suffer financially if they died.

In the context of business partners, insurable interest can be proven if the business would suffer financially if the insured business partner were to pass away. This could be because the insured business partner is a founder, owner, executive, or essential employee whose death would cause financial hardship to the company.

It is important to note that the person being insured must be present for every step of the application process and provide consent. Additionally, the insured will likely need to undergo a medical exam and/or phone interview before the policy is approved.

Parent

As a parent, you can take out a life insurance policy on your children, but it is less common to do so. If you do, you will need to prove to the insurance company that their death will impact you financially. This is called having an "insurable interest".

Insurable interest can be proven if you are responsible for your child's finances, debts, or funeral expenses. It can also be proven if your child has a known health issue or is at risk of developing one. In this case, you can help your child get life insurance early in life when they are more likely to be insurable.

If you are a parent who relies on your child for financial support, you can also take out a life insurance policy on them. However, this is less common and may be difficult to prove insurable interest.

In addition, if you are a parent who is separated or divorced from your child's other parent, you may want to consider taking out a life insurance policy on them. This can be done if you or your children still depend on your former spouse for income, childcare, or other needs.

It is important to note that you cannot get life insurance coverage on your child without their knowledge. They will need to consent to the application process and sign the policy.

When considering a life insurance policy for your child, it is recommended to add a child rider to your own policy, as this will be more cost-efficient than taking out a separate policy for them.

Child

Can somebody insure me life insurance: Child

It is possible to take out a life insurance policy on a minor child (under 18). However, the person taking out the policy must have the child's consent and prove insurable interest, i.e., that the child's death would result in financial loss.

• The child has a known health issue or is at risk of developing one, which could make getting life insurance more difficult and expensive in the future.
• The child is an actor, model, or social media star bringing in substantial income that contributes to household expenses.
• The child has part-time work and helps cover household expenses.
• The child looks after younger siblings, providing a type of childcare that would otherwise need to be outsourced.

When deciding whether to take out a life insurance policy on a child, it is essential to consider the pros and cons. While it can guarantee future insurability and act as a savings vehicle, the likelihood of a child's death is relatively low, and the coverage may not meet the child's needs later in life.

How to Get Life Insurance for a Child

There are a couple of ways to insure a child. One option is to add a children's life insurance rider to an existing term or permanent policy taken out by a parent or guardian. Alternatively, a separate policy can be purchased in the child's name.

To obtain life insurance for a child, parents, grandparents, or legal guardians typically need to contact insurers directly or through a licensed agent. Some employers may also offer optional supplemental life insurance, including policy riders, to cover children.

Best Life Insurance Companies for Children

Several companies offer children's life insurance, and the best option may depend on individual needs and circumstances. Here are some top-rated companies:

• Protective: Offers a wide array of options, including term, whole, universal, and indexed universal life policies, with affordable term rates.
• Nationwide: Receives high marks for customer satisfaction and financial stability, offering whole, term, and universal life insurance for children.
• Mutual of Omaha: Provides a variety of riders, including a disability income rider and a return of premium option for term coverage.
• Penn Mutual: Offers the most options for permanent coverage, including universal, variable universal, indexed universal, whole, and one-year term policies.
• State Farm Life Insurance: Top-ranked for customer satisfaction, offering universal and whole life policies, as well as a children's convertible term rider.

Sibling

You can take out a life insurance policy on your sibling, but only if you are old enough to take out a policy and there would be some financial loss if they died. For example, if you went into business together or bought a home together. You cannot take out a life insurance policy on your sibling simply because you are family.

In the case of a sibling who relies on an adult sibling for support, there is an obvious argument that an untimely death of the adult sibling would have a negative financial consequence. This would mean that the sibling who relies on them would have an insurable interest in the adult sibling.

If you are the adult sibling in this scenario, it might make sense for you to take out a life insurance policy on your sibling and pay their premiums, so you're covered if they pass away and you need financial support.

If you are the adult sibling who relies on your sibling, you will need to prove that you would suffer a financial loss if they were to die. This could include final expenses and debt settlements.

Frequently asked questions