The goal of life insurance is to provide survivors with financial protection in the event that the person who is insured by the policy passes away. Upon the insured’s death, the policy will pay out a death benefit to the beneficiaries that are listed on the policy.
Typically, people purchase life insurance policies for themselves, or they purchase them for other individuals (spouses, children, etc) without with the individual’s knowledge that the policy will be purchased – and with their consent. However, you might be wondering if there is a possibility of purchasing a life insurance policy for someone else without them knowing.
Whatever the reason may be that you are considering purchasing a life insurance policy for someone else without their knowledge, it’s important to find out whether or not you are actually permitted to make such a purchase before you attempt to proceed.
Below, we discuss some of the reasons why you might want to purchase life insurance for somebody else, and whether or not you can make this type of investment without their knowledge.
Why Purchase Life Insurance for Somebody Else?
There are several reasons why someone might want to purchase life insurance for another party. Some of the most common reasons include:
- The individual has dependents and you want to ensure that they are protected financially when that individual passes away. For example, if you are married and have children, yet your spouse is the only person who works, you may want to purchase a life insurance policy for him. Why? – Because you and your children are financially dependent on him and would be in a serious financial predicament if he passed away.
- The person is a valuable asset to your business. For example, you might want to consider taking a policy out on the vice president of your company, or anyone else who has big stakes in your business, such as your partner. The reason? – If that person is a valuable member of your team, if he or she dies, your business could be hit hard financially.
- You have taken a loan out together. For example, if you co-signed a car loan with a friend, you might want to purchase a life insurance policy on her. For what reason? – If she passes away, it could protect you from having to pay for the outstanding balance on the loan out of your pocket.
Can You Purchase Life Insurance for Someone without their Knowledge?
Now that you know some of the reasons why you may want to purchase a life insurance policy for someone else, you are probably wondering if you can invest in this type of insurance without their knowledge.
The short answer is this: No. While you can purchase a life insurance policy for someone else, you must have that person’s consent in order to take out a policy on him or her.
There are four main parties that are involved with the purchase of a life insurance policy. These include:
- The insurance provider that will be issuing the policy
- The party who will own the policy (the individual that will be paying the premiums for the policy)
- The insured party (the individual that the policy will cover)
- The beneficiary of the policy (the individual who will receive the death benefit that the policy will provide)
In order to purchase a life insurance policy, all of the above mentioned parties have to be involved. As such, there is no way to purchase life insurance for someone else without them knowing about it.
Can You Purchase Life Insurance for Somebody Else?
While you cannot purchase life insurance for someone without their knowledge, you can purchase a policy for someone else. But again, we state that the party that you are purchasing a policy for has to be involved in the process.
Whether you are investing in a life insurance policy for your spouse, a child, your business partner, or anyone else, there are specific elements that you will have to present in order to purchase said policy.
To purchase life insurance for another party, you will need:
- 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.