YOU ASK:

Can you buy life insurance on anyone?

WE ANSWER:

Nowadays, it would be impossible for you to buy life insurance on anyone without the knowledge and consent of the person to be insured.

Is knowledge and consent required for all insureds on life insurance applications?

Yes. The reasons why they are required include the following:

  • Life insurance companies will require a medical examination of the individual being insured.
  • Majority of the policies require that the insured individual signs a consent allowing the release of medical information.
  • There has to be “insurable interest” by the one purchasing the policy on the person to be insured. To learn everything about the insurable interest requirements, who has it and when, read our “What are the insurable interest requirements for life insurance?” Q&A.
  • Even policies that do not require a medical exam will still require signature of the individual to be insured.

The provisions of this Act are in response to “dead peasant” policies.

These are insurance policies purchased by a company on their employees who have no knowledge of these policies. The company places itself as beneficiary so that in the event of an employee’s death, it stands to collect a large, tax-free amount.

Businesses are now required to get the consent of the individual being insured.

Additionally, for employer-owned death benefit proceeds, the 2006 Pension Protection Act requires the following:

  • The employee insured must be informed in writing that the company plans to insure his or her life. The employee must also be informed of the policy's face amount and the date the contract is issued.
  • That written consent must be provided.
  • That the employee must be informed in writing if the employer stands to be a beneficiary, whether partial or sole, of any life insurance proceeds.

Can you get life insurance on anybody and not have the owner’s signature?

Anyone who purchases a policy on another person and forges that person's signature in the policy is committing a crime. This will also result to the invalidation of the policy.

Legally, there are very few ways one can get coverage on another person and not have the owner's signature. 

  • For instance, if a parent purchases coverage for a child who is under 15 years of age, the insurance carrier will not require a signature from the child. Therefore, when the child reaches adulthood, it is possible that he does not have knowledge about the policy bought on him by his parents.
  • Another example, a husband's employer offers group life coverage to its employees. The coverage allows for additional coverage for a spouse and the husband signs up his wife without her knowledge.

Who can you buy life insurance for?

To summarize, you must have insurable interest on the person you intend to buy a policy for.

Here are some examples of cases where insurable interest is present:

  • A business has insurable interest in having its manager insured as the company will stand to take a heavy loss (in terms of his/her expertise, training, the clients he/she brings, etc.) in the event that this officer dies.
  • A husband has insurable interest in having his wife covered because he wants that the family receives enough to cover daily needs, debts and mortgages in case of her death.
  • An individual has insurable interest when he gets coverage for the purpose of ensuring that his creditors will be paid the amount he owes them in case he dies.
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