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If you are worried about someone buying a life insurance policy on your life without your knowledge, you can most likely rest easy.  First of all, it isn’t legal, and there are systems in place to prevent this from happening.  Now, is it absolutely impossible that some kind of sophisticated fraud has taken place?  Of course not!  But life insurance companies are extremely sensitive to rooting out any fraudulent activity like this.  Chances of someone doing it successfully are very low!  And their chances of them ever collecting money upon your death are even lower.

It is Illegal to Obtain Life Insurance without Consent of The Insured

The most important piece to remember is that while life insurance laws are state specific, every state requires that in order to take out a life insurance policy, the “insured” person provides their consent.  Without valid consent, the life insurance contract is void. In order to obtain the contract, the owner would need to apply using the social security number of the insured person, the name, address, and also the insured person would need to sign a number of pages in the document.

If someone somehow forged the signature and was able to successfully obtain a policy on someone who did not consent, it would constitute insurance fraud.  Insurance fraud can be punishable with fines and jail time.  It would also probably bring the life insurance company under regulatory scrutiny.  If someone was to obtain a policy without consent, it is a very serious matter that would involve the police, the court system, and the regulatory insurance bodies governing life insurance companies in the State in which they operate and issue the policy.

buy life insurance on someone without them knowing

It is Impractical

Not only is it illegal, it is also impractical.  Most life insurance policies require that a medical exam be performed.  The medical exam typically requires an in person examination and interview.  Furthermore, medical records are normally requested from the insured person’s physicians.  The insurance company also will likely perform a check of the address provided for the insured person to make sure they live in the address provided, and they will issue a notice to that address when the policy is issued.  It is difficult, though of course not impossible, for someone to accomplish all of this without the insured person noticing that a policy was issued on their life.

It May not Actually Pay

Even if a policy was somehow issued without the consent of the person whose life it is written on, life insurance companies have entire departments dedicated to making sure that death claims are paid out appropriately.  At the time of death, an original death certificate usually needs to be provided to the insurance company along with other documentation.  These departments are adept at identifying fraud.  Not only that, but today there is also help from technology in identifying possible fraud.  If there is any reason to suspect fraud has occurred, the claim will be passed to another special department that investigates fraud.  Upon investigation, they will do things like compare signatures on the application to other known signatures, interview family members, and even go so far as to hire private eye detectives.  Without valid signature and consent from the insured person, a life insurance contract is not valid, just like any forged document.

If you purchase a life insurance policy on someone who is not aware, the death claim will likely never be paid.  Furthermore, if fraud is suspected the life insurance company will bring in the local authorities, even if the person who committed fraud lives outside of the United States.  So it is a lot of risk, a lot of sophisticated procedures and fail-safes standing in your way, and very little chance of an actual death claim payout.  Put simply, it is not worth the effort.

That being said, it is still legal to purchase life insurance on another person who is not you as long as there is valid consent.  In order to do this, you will need to satisfy some requirements.

Who Can you Legally Purchase Life Insurance On the Life of?

In order to purchase a life insurance policy, you must prove that there is what is known as an insurable interest.  An insurable interest means that the purchaser of the policy would be financially harmed by the death of the person who is insured.  There are a number of connections that create an insurable interest.

You are always assumed to have an insurable interest in yourself.  You can purchase life insurance on your own life freely.  You are also assumed to have an insurable interest in a direct family member such as a spouse, child, or parent.  Getting further from the family nucleus, an insurable interest could exist on the life of a caretaker or guardian who is not a parent or the child they are in custody of, a business relationship such as key man life, or even a creditor or lender.  Every state issues guidelines for determining if an insurable interest exists between the beneficiary of a life insurance policy and the insured person.

Again the insured person must provide their consent for the policy.

To purchase life insurance for another party, you will need:

So to recap, you can not take out a life insurance policy on someone without their knowledge, and no one should be able to do it to you.  In order to have a valid policy, the owner must:

  • To clearly illustrate your insurable interest. In other words, you will have to show why you want to insure the individual. Insurable interest indicates that you have a financial stake in the individual you are insuring; for example, your spouse is the sole provider of the family and you and your children depend on his income.
  • To get the approval of the person being insured. Before an insurance company will issue a policy, they will need the insured to sign important documents; in other words, they will have to issue their approval for the policy.
  • A medical examination for the insured party. Most insurance providers will require a medical exam before issuing a life insurance policy to determine the risk of covering the individual.
  • Pass through underwriting without needing additional requests that can only be met by the insured person.

And even if someone does manage to commit fraud, and to take out a life insurance policy, they probably will not be able to collect the death benefit.  Today, it simply does not make sense to try to sneak this past the insurance companies given the risks and low probability of success.  If you suspect that someone has taken out a life insurance policy on your life without your consent, please present your information to your States Life Insurance Regulatory Agency.

16 Comments

  1. I suspect my brother and his wife has taken out a insurance policy on my life..
    Name of Byron R, H***…Brother
    Name of wife Gloria Ivy H***..wife of brother
    Wife employed as school teacher in the state of Georgia…

    1. Hi Lavelle. It would be difficult, though not impossible to commit this type of fraud in 2019. If you suspect this to be the case, you need to report it to your state insurance bureau. Laws are very strict regarding this activity and it is highly illegal.

  2. Person is married for 4 years, spouse lives a questionable life style, can the other spouse obtain life insurance policy without signature of the spouse with the questionable life style? Also, adult child has parent without life insurance, is it illegal for child to start life insurance for the parent so that they would not be left holding the bag (responsibility) for parent burial proceedings without signature?

    1. Hi LaTonya. Great questions! It is illegal to obtain life insurance on someone’s life without their consent. So no, one spouse can not get life insurance on the other without them knowing about it. Same goes for the child. Keep in mind that just because someone is the “insured” person on the policy, it does not mean that they have to own the policy. The other spouse, or the child, could own a policy and make payments on it, they just need the consent of the insured person to have their life insured.

      1. I recall seeing (I believe it was “60 Minutes” ) an expose-regarding WALMART taking out life insurance policies on their employees. (without consent)

        Have laws changed since then?

        Comment?

        1. Hi Shelley. There was a lawsuit regarding company-owned life insurance and Walmart, but it was not over whether or not employees had consented to the insurance (they had). In this case, the estates of the employees was seeking recovery of the claims money from Walmart. In actuality, IRS Code 101(J) requires written consent from employees for the life insurance premiums to be tax-deductible, and in addition the Pension Protection Act of 2006 requires the company to get written consent from employees and to keep it on record (this went into effect after the Walmart case where the purchase of policies ceased in the year 2000). So no it is not possible. In the year 2019, this loophole has been closed.

  3. A friend of mine purchased a life insurance policy naming her former husband as the insured, which he agreed to following their divorce, and for which she has paid the premium. The policy was for $1M, which represents just over 11 years of the spousal support he was paying ($90K per year.) He recently died very unexpectedly, and my friend stated that even though he agreed to the policy, he was unaware of the amount. Is this possible? If he agreed to the policy, passed the medical exam, and signed the documentation required, how is it possible for him NOT to know the policy was for $1M? She claims that as long as he consented to the policy, it’s not required that he be informed of the amount she has insured his life for. This doesn’t sound very transparent to me.

    1. Hi Karen. It seems highly unlikely that he did not know the amount, though he may have forgotten. The application would have listed the amount of insurance being applied for.

  4. My mother passed an i just found out she had a life policy on me however she passed an has my sister name as beneficiary whom is someone who i have no contact with an who is not in my best interest whom had no prior knowledge of he policy ,the inc company said there is nothing i can do about it , i o not give my concent on this policy if it does not benefit my children

    1. Hi Brian, if you can prove that you never provided consent and somehow your consent was forged, you may be able to get the policy rescinded. Otherwise, if you do not pay or own the policy you, unfortunately, do not have any recourse.

  5. Hi. If you take out a policy on someone’s life (with their consent) and you pay all the premiums and you are named as the sole beneficiary, would you need to provide insurable interest when claiming (when the insured passes away)? I know their needs to be insurable interest when the policy is taken out but do you need to do it again at claim stage?

    1. Hi Elmare, great question! No you do not need to prove insurable interest after the policy is issued.

  6. My sister in law and mother in law stole copies of my moms death certificate. Now I’m suspicious that they had taken out a policy on her without her consent. How do I have them investigated?

    1. Well you can report them to the insurance bureau in your state, or call the FBI. If they did take out a policy and paid it, it probably doesn’t hurt you in any way. Are you worried that foul play was involved in the death? It would have been tough for them to get a policy issued without your mother’s consent so the certificate is probably for something else.

  7. Hi,
    My sister does not work and is constantly in financial trouble. I have given her
    loans that she will never pay back and I will be 100% responsible for her funeral
    costs if outlive her. Is this a valid reason to get a life insurance policy on her with her consent?

    1. You can not get a policy without her consent. The question is why would she withhold consent? If you pay for the policy it does not detract from her life in any way. You have an insurable interest in her both as a lender and as a direct family member.

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