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BLOG 04/16/2020

Can you take out a life insurance policy on anyone?

Life insurance is designed to protect the people you love from financial challenges after you’re gone. So, who can you buy life insurance for?

In most cases, you apply for a life insurance policy for yourself, and your spouse, children, or another trusted person receives the payout if something happens to you.

But what happens if you’re counting on someone else financially? Can you take a life insurance policy out on anyone else, like your spouse or business partner? Or can someone else take out a policy on you without telling you first?

The short answer: You can’t take out a life insurance policy on someone without their knowledge – and buying life insurance for another person means understanding your options first. Secret life insurance schemes may be the stuff of TV movies, but they’re practically impossible to pull off in real life. Here’s what to know about taking out a life insurance policy on someone else.

Can I take out a life insurance policy for someone without them knowing?

If you’re wondering, “​​Can I get life insurance on someone without them knowing?,” the answer is no. Buying a policy on someone else without their consent is insurance fraud.

If you have permission from the person you’re looking to insure, you can only buy life insurance on other people in certain situations. There are some requirements to keep in mind:

  • You need to demonstrate that you /the owner has an “insurable interest.” That’s typically insurance talk for, “Would you be affected by financial hardship if they died?”
  • You need permission from the insured person. They typically have to sign the insurance forms, or a parent or guardian will need to sign on their behalf if they’re a minor.
  • Depending on the policy, the insured may need to take a medical exam.
  • They’ll also need to provide information like their Social Security number, name, and address.

If you’re interested in buying a policy for someone else, talk to a life insurance agent (and the insured themselves) about the process.

Can someone take out a life insurance policy on me?

Yes, but someone can only take out a life insurance policy on you with your permission. If you’re wondering “Can you get life insurance on anyone?” or “Can someone get life insurance on you without you knowing?” rest easy. Just like you can’t take out a life insurance policy on someone else, no one can take out a policy in your name without asking you first.

If someone forges your signature on documents, it would be considered insurance fraud, which can carry both monetary and criminal penalties. Even on the off chance they’re successful, the chances of the policy actually paying out are very slim.

How does life insurance for someone else work?

There are a few steps to complete when taking out a life insurance policy for someone else, including asking their permission, making sure you can prove insurable interest, and applying for the policy.

The answer to “Can you buy life insurance for someone else?” depends on your relationship, financial dependencies, and their consent. Here’s where to start if you’re looking to buy a policy.

  1. Ask their permission: Discuss your goals in purchasing a policy and make sure they’re comfortable with it. Ask them to gather documents you’ll need for the application process.
  2. Provide proof of insurable interest: You can usually skip this step for spouses, but for most other people, you’ll need to provide documentation that shows their death would create a financial burden for you.
  3. Apply for the policy: Apply for the policy with the policyholder’s details, the insured’s details, and the beneficiary’s details. Depending on your situation, you may be the beneficiary (the person who receives the payout), or you may choose to have someone else receive the money.

Who can you purchase a life insurance policy for?

You can typically purchase a life insurance policy for your spouse, and in some cases, for your child, grandchildren, sibling, or other relatives, too. If you’re asking, “Who can you take a life insurance policy out on?” here are some common examples.

Your Spouse (or Ex-sSpouse)

It’s generally a good idea for both partners to have life insurance coverage if you have children, even if one of you doesn’t earn an income. For example, if you’re the breadwinner, you may purchase a policy on your stay-at-home spouse to help cover childcare or other household needs if they die unexpectedly. Typically, you can purchase a policy for your spouse without having to prove insurable interest. If you’re going through a divorce, you may also be required to take out life insurance on your ex as part of the spousal support agreement.

Your Child or Grandchild

Some parents or grandparents choose to buy permanent life insurance policies as a gift for young children. Once the child is grown, they can use the funds to help cover college or other expenses. Going this route can also protect your child’s insurability. If they develop a health condition later, having life insurance in place means they already have protection they can count on in adulthood. If you’re a grandparent looking to buy coverage, keep in mind that you’ll need the parent’s permission.

Your Business Partner

Taking out a life insurance policy on your business partner can financially protect your family, business, other business partners, and employees in the event of your partner’s death. If they pass away, life insurance can provide you with funds to buy out their share of the business or provide access to necessary funds to keep the business running.

Siblings or Other Relatives

To purchase a policy for your sibling or other relatives, you’ll have to prove insurable interest. Typically, that involves showing documentation to prove your relative’s death would create a financial burden on you. For example, say you have a sister taking care of your parents full-time. If your sister died, the costs of caring for your parents would fall on you, and you could use the payout from a life insurance policy to continue supporting them.

Still wondering who you can take a life insurance policy out on? Contact a life insurance agent if you have additional questions about purchasing a life insurance policy for someone else.

How can I find out if someone took out a life insurance policy on me?

If you think someone took out a policy on you, you can contact your state insurance department to help you sort everything out. You can also look up your consumer file on the Medical Information Bureau, which keeps records of people who have applied for life insurance in the last seven years.

Find a life insurance quote for you

Have more questions about buying life insurance? We’re here to help. Give us a call or compare quotes from 20+ top-rated companies online.

 

At eFinancial, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed and updated regularly to ensure the information is as relevant as possible.