Can you buy life insurance for someone else?

It is possible to buy life insurance for someone else, but you need to prove insurable interest and have the person’s consent. If you choose to take out permanent life or term life insurance on someone else, make sure you are prepared beforehand with what you’ll need to prove insurable interest and other important details. 

Read on to learn more about how to take out life insurance on someone else and what kind of people you can take a policy out on. 

Who can you buy life insurance for?

As long as you can prove insurable interest and have consent, you can insure almost anyone. We’ve outlined some different types of people that another person may insure. 

• Business partners. If your business would be affected by the passing of a business partner, you should take out a life insurance policy. You can use the death benefit to buy out the partner’s shares and take care of their family. 
• Children. It is rare to buy a life insurance policy for a child, but if you might struggle with funeral expenses or lost wages, it can be beneficial to take out a policy, especially if the child is ill. 
• Former spouses. Even if you are divorced, you could face financial issues if a former spouse dies because of child care support, joint property taxes, and more.  
• Grandparents. It can be harder for grandparents to find a policy or pay for insurance on a fixed income, making it easier for their children to take out a life insurance policy for them. The policy payout can help pay off any debts or funeral expenses. 
• Siblings. One common reason to insure a sibling is if they are caring for your parents, and you taking over those responsibilities would be financially difficult. 
• Spouse or significant other. If you would struggle financially if your spouse died, such as having to pay off medical bills, it is smart to take out a life insurance policy. 

According to Forbes, you can’t obtain a life insurance policy on a stranger or even someone you just casually know. You have to have an insurable interest in that person. As long as you have a solid reason for proof of insurable interest, you can get life insurance for a number of different relatives and associates. However, if you don’t have an insurable interest or the person doesn’t consent, you can’t get a life insurance policy for them. 

Taking out a life insurance policy on someone without meeting these requirements can result in a canceled policy or charges of insurance fraud. 

Read more: Life Insurance for Siblings

What You Need to Buy Life Insurance for Someone Else

There are three things you’ll need to buy a life insurance policy for someone else: insurable interest, consent, and a medical examination (if applicable). You will also need to pay the premiums, as you will be the listed policyholder on the life insurance policy.  We’ve explained each of these steps below in more detail. 

Prove Insurable Interest 

In order to insure someone else, it is vital to prove insurable interest in that person. Insurable interest is simply proving that you financially benefit from that person being alive. For example, if you have a business partner whose death would financially impact the company, it is smart to buy a life insurance policy. 

Likewise, suppose you have a spouse whose death would make things financially difficult, such as if they contribute significantly to the finances of the house or are the main childcare provider. In that case, it is prudent to get a life insurance policy.

If you would be unaffected financially by a person’s death, it is usually not advisable to take out life insurance and you likely won’t be approved for a policy. 

Provide the Consent of the Insured Person 

It is impossible to get a life insurance policy on someone else unless they provide consent. Generally, proof of consent can be written in a signed letter, or the person can provide proof of consent in person. 

The insurance company will verify the proof of consent, specifically for life insurance for parents, to avoid negligence charges before issuing a policy. It might take the insurance company a few days to confirm consent and process the policy.

Complete a Medical Examination 

Most insurance companies require the person being insured to receive a medical exam. This will help the insurance company determine rates. For example, a smoker will have higher rates than a nonsmoker. 

The person being insured may need to visit a provider to get a medical exam, or the insurance company may send a qualified medical provider to your home for a quick medical exam. 

Pay the Policy Premiums 

Because you are taking the policy out on someone else, you will be responsible for paying the policy premiums and maintaining coverage. If you miss a payment, there is usually a 30-day grace period at most insurance companies. 

However, your life insurance policy will be void if you don’t make the payment by the end of the grace period. 

To learn more about the different types of life insurance and how much they cost, read our article about term vs. permanent life insurance. 

Case Studies: Buying Life Insurance for Someone Else

Case Study 1: Protecting a Business Partnership

John and Mark have been business partners for over a decade, and their company’s success relies heavily on their combined skills and expertise. To safeguard their business against the financial consequences of either partner’s untimely death, John decides to purchase a life insurance policy on Mark.

By doing so, John can ensure that the business will have the necessary funds to continue operations in the event of Mark’s passing.

Case Study 2: Securing the Family’s Financial Future

Sarah and David are a married couple with two young children. David is the primary breadwinner, and his income supports the family’s lifestyle and provides for their children’s education.

Recognizing the potential financial hardship that Sarah and the children would face in the event of David’s death, Sarah decides to take out a life insurance policy on her husband.

This policy would provide a financial safety net to cover living expenses and future needs, ensuring that the family’s financial future remains secure.

Case Study 3: Planning for Elderly Parents

Anna and Michael are concerned about the well-being of Anna’s aging parents. They know that their parents have limited savings and rely on their pensions for income.

To alleviate the potential financial burden that would arise if either of Anna’s parents were to pass away, Anna and Michael decide to purchase life insurance policies on them.

These policies would provide funds to cover funeral expenses and any outstanding debts, easing the financial strain on the surviving spouse and family.

Final Word on Buying Life Insurance for Someone Else 

Buying life insurance on someone else can be done as long as you have insurable interest and the other person’s consent. As the policyholder, you will be responsible for making the life insurance payments. 

It is best to shop around and compare rates in order to find affordable life insurance rates when buying a policy for someone else. Use our free rate comparison tool to find the best rates from life insurance companies in your area.