Life insurance is a valuable way to protect yourself and the loved ones who would be impacted by your death. You may already have your own life insurance policy, but can you buy life insurance for someone else? You can, but there are certain criteria you must meet.
Can You Buy Life Insurance for Someone Else?
There are three parties involved in purchasing life insurance: the policyholder, the insured and the beneficiary.
- The policyholder is the owner of the life insurance policy and the person who makes all the decisions on the policy.
- The insured is the person whose life is being covered by the policy.
- The beneficiary is the person who receives the death benefit when the insured person passes away.
When you take out a life insurance policy for yourself, the policyholder and the insured are the same person. It is possible, however, for the insured and the policyholder to be two different people. Just know that if all three parties are different people, the death benefit may be subject to taxation. This is sometimes referred to as the Goodman triangle. As long as the policy owner and the insured person are the same, you won’t have to worry about these taxes.
Can You Take a Life Insurance Policy Out on Anyone?
Though you can take out life insurance on another person, it can’t be just anyone. Not only must it be someone you know, but someone whose death would impact you financially. This is called having an insurable interest in someone. To prove insurable interest, you, the insured person and the beneficiary will all need to speak to the life insurance company and answer questions about your relationship.
Insurable interest covers close family members like spouses, children, grandparents and siblings. Business partners can also create insurable interest since life insurance would support the company’s operations in the event that one partner died. If you can’t prove insurable interest, the insurance company will reject your application.
Can You Buy Life Insurance for Someone Without Them Knowing?
If you’re trying to buy life insurance for someone else in secret, you’re out of luck. In order to buy life insurance for someone, you’ll need their consent. The insured person will have to fill out an application, go through the underwriting process and sign the forms. Taking out insurance on someone without their knowledge is considered fraud.
Can You Buy Life Insurance for Someone Who Is Dying?
Buying life insurance for someone with a terminal illness is going to be difficult, whether that’s you or someone else, because many insurance companies will reject individuals with significant health problems. A guaranteed issue whole life insurance policy doesn’t require a medical exam and has few or limited health questions and will likely be the best option for someone who is dying. This type of policy will be more expensive, but because you’re paying more in premiums, insurance companies may be willing to cover higher-risk individuals. You’ll also have to have insurable interest in the dying person the same as if you were buying insurance for anyone else.
Get a Life Insurance Quote Today
If you’re looking for a life insurance policy for seniors, Americo Senior Life is here to help. We offer a variety of affordable options tailored to meet your needs, some without medical exams or lengthy questionnaires. Ease your mind and get an online quote from Americo Senior Life today.