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It depends on if you have insurable interest — and their cooperation.
Generally when people buy life insurance, they are applying to be the insured (the policy owner) and to name someone else the beneficiary. But there are some occasions when it may make sense to purchase and be the owner of a policy that insures someone else and makes youthe beneficiary.
This is legal and it’s common, but you can’t just buy a policy on anyone. You have to have their permission and additionally, you have to be able to show insurable interest, which is basically, proof that you will suffer financially if the insured dies.
In order to apply for a policy for someone else, you’ll need their consent for the application process. They’ll not only need to sign paperwork, you’ll also need their cooperation for the application itself, which will include questions about their health and a medical exam.
Once you have their permission, talk to an independent life insurance agent like those at Policygenius who can help you find the cheapest coverage based on the insured’s health profile and background.
During the application process, you’ll need to prove to the insurance company that you have something called "insurable interest." You can roughly translate that to "financial interest" — basically, you need to prove that if the insured were to die, it would put a financial burden on you. Typically, spouses and parents can purchase policies without otherwise proving insurable interest. Other relationships, such as business relationships, will likely need documentation.
You may also want to talk to your lawyer, accountant, or financial advisor to get a better sense of how this policy will work in the context of your larger financial safety net.
Our agents can help you through every step of the application process. You can get started by comparing life insurance quotes.
If you own and operate a business with a partner, you could buy a life insurance policy on your business partner and name yourself or the business as the beneficiary. The proceeds from this policy would then go either keep the business running.
This type of life insurance is typically called key person insurance. Read more about life insurance for business owners.
If one spouse is the breadwinner, it may make sense for her to purchase not only her own life insurance policy, which would name her spouse as the beneficiary if she dies, but also a policy to insure her spouse in case she dies. This especially makes sense if the spouse is not an income earner (and in that case cannot purchase her own policy), but provides child care that the breadwinner would need funds for in case of the spouse’s death.
Read more about life insurance for spouses.
Parents and grandparents can both take life insurance policies out on children. Whole life policies are available for young children, or you can add a child rider to your own policy. Read more about buying life insurance for children.
If you have cosigned private student loans with your children, you may want to take out life insurance policy so that you can pay off those loans if your child dies prematurely. Read more about buying life insurance for your college student.
It’s unlikely that you have insurable interest in your sibling, but there are some cases in which you might. For example, if your sister is taking care of your elderly parents, if she were to die, your elderly parents may be at risk for losing their care. You could purchase a life insurance policy for your sister, name yourself the beneficiary, and, in the case of your sister’s death, you’d be able to use that money to help continue care of your elderly parents.
Many people are interested in taking life insurance policies out on their parents in order to pay for funeral expenses when they die. While it’s usually hard for children to prove insurable interest on their parents, you can certainly help your parents apply for their own policy and make you the beneficiary.
Read more about purchasing life insurance for your parents.
Find more info or talk to a life insurance expert today.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
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Yes, we have to include some legalese down here. Read it larger on our legal page. Policygenius Inc. (“Policygenius”) is a licensed independent insurance broker. Policygenius does not underwrite any insurance policy described on this website. The information provided on this site has been developed by Policygenius for general informational and educational purposes. We do our best efforts to ensure that this information is up-to-date and accurate. Any insurance policy premium quotes or ranges displayed are non-binding. The final insurance policy premium for any policy is determined by the underwriting insurance company following application. Savings are estimated by comparing the highest and lowest price for a shopper in a given health class. For example: for a 30-year old non-smoker male in South Carolina with excellent health and a preferred plus health class, comparing quotes for a $500,000, 20-year term life policy, the price difference between the lowest and highest quotes is 60%. For that same shopper in New York, the price difference is 40%. Rates are subject to change and are valid as of 2/17/17.
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