When it comes to wealth protection services, there are very few things more important than life insurance. And while we’ve already discussed the most common mistakes people make when choosing life insurance, there are more things you need to know about life insurance.
One common question we often get is if it’s possible to take out life insurance for other people. And while this may seem simple, this is actually a pretty complicated subject. If you want to know more about this subject, then we’ve got just the thing for you. Read on as we discuss the possibility of taking out life insurance on someone else.
Can You Take Out Life Insurance on Someone Else?
Yes, it’s entirely possible to take out life insurance on other people. However, there are many caveats to this. For one, insurance providers will not allow you to take out a life insurance policy on simply anyone else. This only means that while it is perfectly legal to buy life insurance for another person, certain conditions have to be met.
How Do You Take Out Life Insurance on Someone Else?
As we’ve already mentioned above, there are certain requirements for you to be able to take out insurance on another person. Here are the two requirements:
- Consent: It’s not possible to take out a life insurance policy on a person without their consent. This implies that the person you’re taking out insurance for has to be involved in the application process. Not only will they need to sign the application, but they will also need to go through the underwriting process and the life insurance medical exam.
- Insurable Interest: Aside from consent, you will have to prove insurable interest in the person you’re taking out insurance for. Insurable interest signifies that you would suffer financially if that person died. Usually, this is easy to prove for familial relationships. However, for non-legally binding partnerships, this can be quite tricky.
Who Can You Buy Life Insurance For?
Considering the strict requirements, you may be confused about who you can actually take out for. To help you out, here are a few common scenarios where you would take out life insurance for another person:
- Business Partner: It’s common for business partners to take out life insurance on each other. The death payout, in this case, will usually be used to buy the partner’s share of the business.
- Spouse: This is common, especially if your spouse, who you’re taking out life insurance for, has no income. In cases like this, the breadwinner often takes out life insurance for their partner. As long as your spouse is involved in the entire process, the application should go smoothly.
- Your Child: Child cover is normally taken out as an added benefit on a parent’s life insurance policy and typically expires once the child reaches legal adult age (varies depending on insurer).
Take The Next Step
As you’ve read, it is possible to take out life insurance on other people as long as you meet the requirements. However, before buying a policy for someone else, it’s best to talk to a financial adviser to assess whether this is the right choice for you. If you have more questions about this, talk to the experts at Central Coast Financial Planning Group (CCFPG).
At CCFPG, insurance is one of our specialties and is something we believe is an integral part of your overall wealth management plan. If you’re looking to protect yourself and your family from the unexpected be sure to talk to one of our experienced wealth protection advisers today.
DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group and Sydney Wealth Advisers are subsidiaries of Coastal Advice Group which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.