Can You Take Out a Life Insurance Policy on Anyone? Well, it may or may not be possible to take out a life insurance policy on anyone, but then, there have to be valid reasons for this, as it has a process. What are they? Read on to figure it out.
But then, is it possible to take out a life insurance policy on anyone? No, you have to establish an “insurable interest” in the life of the individual, in that their death would cause you a financial loss.
This typically applies to a relationship like spouse, child, or business partner, in that their death would cause you financial difficulties.
How does an Insurance Policy Take Effect?
The key requirement is a financial link. For example, if your spouse’s income is crucial for your household, his or her death would be a financial loss, and you would qualify to purchase life insurance on him or her.
You also need the insured person’s consent, unless he or she is a child or otherwise reliant.
Examples:
Spouses, children, business partners, and co-signers of a loan are common instances where you have an insurable interest.
It is not possible to purchase life insurance on a stranger with whom you do not have a financial relationship. The insurance market and laws generally frown on buying policies on people in whom you have no real financial interest, for moral and social reasons and to prevent exploitation.
It is vital to have the consent of the person to buy a life insurance policy on him or her, especially if he or she is not a dependent or child.
Can Someone Else Buy a Life Insurance Policy on You Without Your Permission?
No, you cannot have someone buy a life insurance policy on you without your permission and knowledge. The insured must give permission and sign for a policy to be in effect. It is a criminal act to forge a signature and will invalidate the policy.
Insurance companies need the insured individual’s overt consent and signature on the application. Only someone with an insurable interest in your life can purchase a policy on you, which is to say that they will be out of pocket if you are killed.
Spouses, relatives, or business associates who rely on your earnings are a few examples. Also, forging a signature to take out a policy is a serious crime and will invalidate the policy.
If discovered, the insurance company can seek to recover the money, and the person who forged the signature could face legal consequences. You can find out whether a person has bought a life insurance policy on you by making a phone call to your state’s Department of Insurance or the Medical Information Bureau (MIB)
Can you Buy Life Insurance on Another Person?
Yes, you can buy life insurance on someone, but it’s not exactly as simple as just buying a policy in their name. You have to demonstrate an “insurable interest” and gain their consent.
To get this, one has to demonstrate that the person’s death will cause financial loss or distress to you. This could be a family relationship like spouse, partner, child, business partner, or co-signer of a loan.
The person you are insuring must be notified of the policy and give their consent. They must also be involved in the underwriting process, which includes a medical exam. You can’t just buy life insurance on somebody. You need a valid reason to have an insurable interest.
How Much is Life Insurance Per Month?
The monthly cost of life insurance varies dramatically, though you may find yourself paying as little as $10 or more than a hundred dollars a month, depending on your policy, how much coverage you purchase, age, health, and more.
One simple explanation is that term life insurance is generally cheaper than whole life insurance, but whole life insurance has permanent coverage and an element of savings too.
Factors Affecting Cost:
1. Age
Young individuals typically pay less than mature individuals for similar coverage because, statistically speaking, they are less likely to die in the duration of the policy.
2. Gender
The cost of life insurance is typically greater for men compared to women due to their typically shorter lifespan.
3. Health
Individuals already ill with health problems or who are smokers may be required to pay an extra premium compared to healthy individuals.
4. Amount of Coverage
An increased death benefit will generally equate to an increased monthly premium. Term life insurance (which provides coverage for some time) will generally be cheaper compared to whole life insurance (which provides coverage for the lifetime and savings feature).
Also, the length of the term (e.g., 10-year, 20-year) affects the premium, with longer terms being more costly. For a person aged 30, a 10-year term policy for $250,000 would cost between $10 and $20 per month.
The same policy on a 50-year-old could be significantly higher, e.g., several hundred dollars a month. A $500,000 whole life policy for a 30-year-old might cost around $440 per month. Many insurance companies and financial websites offer online calculators to estimate your potential monthly premiums.
Last Lines
You can also contact the National Association of Insurance Commissioners (NAIC) for their free Life Insurance Policy Locator Service, which tries to find policies in the records of many insurance companies.
Another great source might be your state Department of Insurance (DOI). To be approved for a life insurance policy, it must be that they can engage in risky hobbies and activities such as parachuting and receiving a DUI, or speeding violations.
Also, they are at the point of having a risky job like roofing, having a criminal record, or worse-than-perfect financial history, smoking, and reporting for illegal drugs.
