While you can’t take out a life insurance policy on just anyone, you can take one out on others in your life with their permission. Usually, people purchase life insurance policies for themselves to provide their loved ones with financial support after passing away.

However, if another person’s death would severely impact your economic well-being, you could purchase a life insurance policy on them as long as you have their consent. While buying a life insurance policy on someone else is somewhat uncommon, it could make sense when you have a significant insurable interest in them.

How does getting life insurance on someone else work?

When you take out a life insurance policy on yourself, you play two roles: the policyholder, who purchases and manages the policy, and the insured. You designate one or more people as beneficiaries, who receive the payout when you pass away. Conversely, when you take out life insurance on someone else, they’re the insured, while you typically act as both policyholder and beneficiary.

The application process for a life insurance policy on another person has a few additional steps:

• Get consent: You’ll need explicit, written permission to take a life insurance policy out on someone else.
• Choose a policy: The life insurance policy that makes the most sense for you provides the coverage you need within your budget.
• Prove insurable interest: Depending on your relationship with the insured, you may have to provide legal or financial documents or complete interviews to show your “insurable interest,” which means you have to demonstrate that you would financially suffer if they were to pass away.
• Complete application: As you submit the application, be certain the insured understands that they may have to undergo a basic medical exam and answer questions about their background.
• Pay premiums: Once you’re approved, pay premiums to keep your policy active.

Why would you get life insurance on another person?

You could get life insurance on another person if you have shared personal, familial, or business financial responsibilities.

For example, if your aging parent moves in with you, you may worry about covering their end-of-life expenses and debts when they pass away. Their death will affect your financial well-being, so you could apply for a life insurance policy for them. Likewise, if you started a business with a partner who invests time and money into your company’s operations, their death could drastically impact your finances. With their consent, you could take out a life insurance policy on them. In fact, some lenders offering small business loans require business partners to take out life insurance on each other to protect the repayment of the loan.

Who can you get a life insurance policy on?

Technically, you can get a life insurance policy on anyone you have a relationship with as long as you have their consent and can prove your insurable interest. Most often, people take out policies on the following family members and peers:

Parents

Your parents might need extra support as they grow older. That could mean welcoming them into your home or paying for an assisted living facility that provides them the care they need. You may take out a life insurance policy on one or both of your parents to account for the cost of their care, offset inheritable debts, or cover end-of-life costs. That way, you could enjoy your time together without worrying about your financial future.

Business partner

When you start a business with someone or bring them onto the team as a vital contributor, they’re often central to the business’s success. With their consent, you could take out a life insurance policy to cover essential business costs if they pass away or hire someone to help take on some of their responsibilities.

Spouse/Partner

Typically, each spouse or partner has their own life insurance policy. However, in some circumstances, it might make sense for one partner to take out a life insurance policy on the other.

You may also want to take out a life insurance policy on an ex-partner if you or your children depend on their income. In some cases, judges require life insurance policies as part of spousal support requirements during a divorce.

Children

Parents and grandparents can typically take out life insurance policies for minor children reasonably easily. If your child may develop a health condition that makes it harder to qualify for life insurance as an adult, taking out a life insurance policy on them could help them secure coverage. Otherwise, adding a child rider to your existing life insurance policy can make sense.

If your children are adults, you may want to take out a life insurance policy for them if you have any cosigned loans, like private student loans or a mortgage. You may also consider a life insurance policy for other shared expenses, like a family home, or if you rely on their income.

Siblings

Sometimes, family responsibilities may leave siblings with interconnected expenses. Perhaps you’ve cosigned your siblings’ loans or split the costs of caring for your aging parents. Or maybe you and your siblings share a mortgage for a family vacation home. In any of those circumstances, you may want to purchase a life insurance policy on them to continue maintaining those family expenses even if your sibling passes away.

What type of life insurance should you get for someone else?

Insurers offer a wide range of life insurance policies that generally fall under two categories: term and permanent life insurance. Term life insurance provides coverage over a fixed period, usually between 10 and 40 years. After the term, it lapses. On the other hand, permanent life insurance lasts through the end of the insured person’s life. The life insurance you should purchase for someone else depends on their unique circumstances and your financial needs.

• If you’re buying life insurance for a child, you may want to purchase permanent life insurance so they can inherit lasting coverage. It’s important to note that they’ll become responsible for premiums after a certain age.
• If you want to purchase a life insurance policy for a sibling to cover their portion of mortgage payments, you may want to consider a term life insurance policy for the length of the mortgage.
• If you want to buy a life insurance policy for your parents but don’t anticipate inheriting a significant amount of debt, a final expense policy could meet your coverage needs. Final expense life insurance is permanent, but has minimal medical exam requirements, a smaller death benefit to cover end-of-life expenses, and a lower cost than many other permanent policies.

Review life insurance options with Fidelity Life

Buying a life insurance policy for another person can be complicated. A licensed life insurance agent can help you understand your options. For more information, call Fidelity Life today or go online for a quote.