Can You Take Out a Life Insurance Policy on Anyone?

You can take out life insurance on someone else, but only under specific legal conditions. There are two main things you need before buying life insurance on another person:

• Insurable Interest: Insurable interest means you'd suffer a financial loss if the person died. Examples include lost income, increased debt responsibility, business disruption costs or dependency on their caregiving.
• Consent: You need the insured person's knowledge and permission. They must participate throughout the application process, which includes signing forms and may require a medical exam. Taking out a policy without their knowledge isn't legal.

Failing to satisfy the two conditions means you can't initiate a life insurance policy on someone else. Here are examples of people you can’t get life insurance for:

• Strangers: No insurable interest means no coverage. You can't insure someone you have no financial relationship with.
• Non-consenting adults: An adult's explicit consent is a legal requirement. A policy taken out without it isn't valid.
• Minors without parental consent: Insuring a minor requires explicit consent from a parent or guardian, even when an insurable interest exists, such as for a close relative.
• Public figures: Celebrities and public figures are generally unavailable to insure unless you can document a direct insurable interest, which is uncommon.

There are four situations where covering another person makes financial sense.

Family income replacement

A death benefit covers the household's lost income from the primary earner, the remaining mortgage balance and shared debts. It also funds children's future education costs.

Business continuity

Key person insurance offsets the operational disruption when a critical employee dies. Buy-sell agreements funded by life insurance let you buy out a deceased partner's ownership stake. The coverage creates time and capital to recruit a replacement.

Future insurability

Locking in coverage while someone is young and healthy guards against future health issues that would make coverage expensive or unavailable. Early enrollment is particularly relevant when the person has a family history of genetic conditions or chronic illness.

Final expenses

End-of-life costs average $88,300, comprising $80,000 in medical expenses in the final year and $8,300 for funeral costs. A death benefit covers outstanding medical bills, debts and estate settlement costs, reducing the financial burden on surviving family.

Taking out life insurance on another person requires two things: insurable interest and explicit consent. Qualifying relationships include spouses, children, parents and business partners. You need to document the financial hardship their death would cause, and the insured must participate throughout the entire application. Compare quotes across multiple insurers before committing.