Life insurance is important for your loved ones, and getting them insured may be a concern of yours, but what if they don’t take out life insurance on their own? Let's talk about how you can purchase life insurance for someone other than yourself.
How To Take Out Life Insurance on Someone Else
Though it’s not possible to take out a life insurance policy for a stranger or someone you casually know, you can purchase a policy for someone you have insurable interest with or consent from the insured.
Insurable Interest: To buy a policy for someone other than yourself, you need to show the life insurance carrier that you would suffer financially if that person died.
Consent from Insured: The person that you are buying the insurance policy for must be involved in the application process. He or she will have to go through an underwriting process which often involves some labwork and sign the application if over the age of 18.
Related: Are You Protected? Why You Should Review Your Life Insurance Policy.
Who Can You Buy Life Insurance For?
Depending on your relationship with the person, you can buy a life insurance policy for:
Business Partner/ Key Employees
It’s pretty common for business partners to have a buy-sell agreement that stipulates what happens if something goes wrong with either of them. Each business partner can buy a life insurance policy on the other using the lump sum benefit to buy the partner’s share of the business from a surviving spouse or family member.
Your Child
Depending on if you’re a parent, grandparent, or legal guardian, you can name yourself beneficiary and buy them a life insurance policy. The main goal with your child’s life insurance policy is to make sure they’re covered if health conditions occur later in the child's life which may prevent them from getting a policy in the future.
Your Spouse
The most practical reason you’d want to buy a life insurance policy for your partner is if one spouse is a main source of income and the other has little or no income to purchase their own policy. If the main source of income is paying for the policy, they would also want to be the policy owner.
Former Spouses
In the case of a divorce, you might want to think about getting a life insurance policy for a former spouse to help cover costs of now raising kids on your own.
Parents
Taking out an insurance policy for your parents makes sense in many situations. If they don’t have a policy of their own, you might want to buy a policy to help cover funeral and other final expenses.
Related: Helping a Parent with Medicare Coverage
Siblings
If one of your siblings is caring for one of your parents, you have insurable interest, in which case you can purchase a life insurance policy for the sibling taking care of the parent. In this case, naming yourself as a beneficiary of the policy and using the payout to hire someone to replace what your sibling was doing.
Life insurance can make what can otherwise feel like a stressful financial situation comfortable, at least financially. Before you buy life insurance, it’s best to get in contact with a broker. Discuss some of the pro's and con's and consider getting a quote from more than one carrier.
Choosing a life insurance plan can be difficult. Working with an insurance broker can help you find a plan that fits your needs. Schedule a one-on-one meeting with one of our life insurance brokers to get your insurance questions answered!
