When most people go looking for information on how to purchase life insurance, they usually are looking to learn how to purchase a policy for themselves. They look for advice on what would best suit their finances, what to expect from the application process and medical exam, and how they can adjust their lifestyle to get a better deal on their insurance.
Whether you’re a parent looking to buy a policy for your child, a newlywed wanting to make sure that your spouse is protected, or you have a business partner and wish to protect your investment, it is perfectly legal for you to buy life insurance for someone else. However, the process will likely be a little different than purchasing your own policy, and there are some unique things to know before purchasing a policy for a third party.
Perhaps the most important requirement is that the insured consents to having this policy taken out on them. This helps to prevent immoral or fraudulent behavior (such as secretly taking out an insurance policy on another person and naming yourself the beneficiary), but it is also necessary when purchasing the policy. The insured does not only need to consent to purchasing the policy; they will also need to agree to give the insurance company important information about their health, as well as consenting to undergo a medical examination in some cases. You will also need the insured’s signature.
There are some exceptions to this requirement. Depending on where you live, you may not have to get consent if you are taking out a policy on your spouse or on a child aged fifteen or younger. This does however vary by state, so make sure you’ve discussed this with your insurance agent and know the law.
Establishing what’s called “insurable interest” is another crucial step to the process. Insurable interest indicates that you would be adversely affected if the person who is insured died, and thus have a valid reason for purchasing insurance on them.
Marvin Feldman, president and CEO of Life Happens, says, “There has to be a true relationship where there’s going to be a loss when the person dies, whether that’s an emotional loss or a financial loss.”
The reason for this requirement is to prevent individuals from taking out life insurance policies on others for the sole purpose of personal financial gain. As a rule of thumb, you will need to prove that this person’s death would affect your finances. Keep in mind that being related to someone alone is not sufficient evidence. You would still need to prove that their death would negatively impact your finances, whether it is because this individual provides some or all of the household’s income or because you would be responsible for burial and funeral arrangements should they pass away.
About National Catholic Society of Foresters
At National Catholic Society of Foresters, we pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. Sales from our financial services products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs. Our portfolio is extensive, ranging from various life insurance policies to IRA’s to support your financial needs no matter what stage of life you’re in. For more information, contact our friendly experts today at (855) 804-7424.