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 must have a financial stake in the person continuing to live. You'd suffer financial loss if the person died. Examples include loss of income, increased debt responsibility, business disruption costs or dependency for essential caregiving.
• Consent: You need the insured person's knowledge and clear permission. The person must participate throughout the entire application process, sign forms and potentially undergo medical exams. No secret life insurance policies are legally allowed.

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: Insuring someone you have no relationship with is typically not permissible because you lack an insurable interest in their life.
• Non-Consenting Adults: If an adult doesn’t give their consent, taking out life insurance on them is not legally viable. Consent is a legal requirement that ensures the insured is aware of and agrees to the terms.
• Minors Without Parental Consent: You can’t take out a life insurance policy on a minor unless you have explicit consent from their parent or guardian. Even if you have an insurable interest, such as being a close relative, parental consent is mandatory.
• Public Figures: Celebrities and public figures are generally off-limits unless you can prove a direct insurable interest, which is unlikely for most people.

While most people take out life insurance policies on themselves, there are specific situations where buying coverage for another person provides important financial protection.

Protecting Your Family's Financial Security

Life insurance replaces the lost income of the primary household earner. The death benefit covers the remaining mortgage balance and shared debts. It funds children's future education expenses and maintains your family's lifestyle after a loss.

Ensuring Business Continuity and Protection

Key person insurance helps offset the cost of operational disruption in the event of a critical employee's death. Buy-sell agreements funded by life insurance let you buy out a deceased partner's ownership shares. The coverage provides time and money to recruit a qualified replacement and maintain business stability.

Guaranteeing Future Insurability

Lock in coverage while the person is young and healthy. This protects against future health issues that make coverage expensive or impossible to obtain. Buying early makes sense if the person has a family history of genetic conditions or chronic illnesses. You secure lifetime coverage at lower rates.

Covering Final Expenses

End-of-life costs average $88,300 ($80,000 for medical expenses in the final year and $8,300 for funeral costs). Life insurance covers outstanding medical bills and debts, estate settlement costs and taxes. The death benefit relieves your family of financial burdens during grief.

You can take out life insurance on someone else, but not on just anyone. Two mandatory requirements apply: insurable interest and explicit consent. Common qualifying relationships include spouses, children, parents and business partners.

You must prove you'd suffer financial hardship from the person's death. The insured person must actively participate throughout the entire application process.

Shop around and compare quotes from multiple insurance carriers. Work with a licensed insurance agent or financial advisor for guidance.

Here are answers to the most common questions about taking out life insurance on someone else.