Can you take a life insurance policy out on anyone?

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Life insurance is a financial planning tool that provides a tax-free payout to designated beneficiaries after death. Most people purchase a policy to help plan for their death and leave their dependents and loved ones with a financial cushion.

However, there are occasions when someone may want to purchase a life insurance policy for someone other than themselves. While there are options available to do this, there are also guidelines that need to be followed before purchasing a policy on someone else.

Can you take out life insurance on anyone?

It is impossible to take out a $1 million life insurance policy against an ailing public figure or an athlete in a high-risk sport. Betting against someone’s life is not only unethical, but also does not make financial sense for life insurance providers.

It is possible to take out life insurance on someone else only if there is some relationship between you, such as a friend, business partner, spouse or parent—and only if the person being insured consents to a life insurance policy being taken out on them.

Life insurance companies also require that the relationship passes the “insurable interest” test, which means demonstrating that the insured’s death would have an adverse impact on the person who wants to purchase the policy.

How to get life insurance for someone else

Purchasing life insurance for anyone follows the same basic steps.

Select a type of life insurance policy

The first decision is whether permanent or temporary coverage is necessary. Term life insurance is cheaper than permanent life insurance and is a temporary solution for a period of time such as 10, 20 or 30 years. Whole life or universal life insurance, which are types of permanent life insurance, stay in effect as long as the premiums are paid and build a cash value amount that can also be used to borrow or withdraw money.

Get quotes

No matter what kind of life insurance coverage is needed, it’s a good idea to shop around for quotes from several life insurance carriers to find the best price and terms. The same type of coverage could vary in price from one carrier to another.

Get permission

Once it’s time to apply, the next step is to get permission from the person you plan on insuring. They will need to sign a consent form and likely undergo a medical exam before the policy is approved. Even if a policy that doesn’t require a medical exam is selected, failing to obtain signed consent from the person you’re buying the policy for is considered insurance fraud.

When to buy life insurance for someone else

Some circumstances make purchasing a life insurance policy on someone else a smart financial decision.

Financially protect family members

For people who are raising children together and have assets such as a home, a life insurance policy could make up for the lost income if one of them passes away. A life insurance policy on an aging parent could provide cash to pay off debts left behind or cover burial costs. And families with a higher net worth may want to consider life insurance to pay any estate taxes.

Ensure business continuity

The death of partners or key employees can sometimes endanger a company. While a life insurance payout may not replace the individual’s skills and knowledge, it could provide capital to recruit a replacement or cover critical costs while the business adjusts.

Guaranteed future coverage

Some families have a history of genetic conditions and chronic illnesses (such as diabetes or heart disease) that make obtaining life insurance coverage difficult. A permanent life insurance policy for a child or young adult that is purchased while they are still healthy guarantees coverage, even if they’re diagnosed with a health condition in the future.

Frequently asked questions

Can you buy life insurance for anyone?

You can only buy life insurance on someone that consents and in whom you have an insurable interest. You’ll need them to sign off on the policy and prove that their death could have a financial impact on you.

How do I choose the best life insurance?

To choose the best life insurance policy, decide what kind of coverage is necessary and shop around for multiple quotes. These companies rank favorably with consumers for life insurance. Talk to your insurance agent about which coverage is best for you.

What does life insurance cover?

Life insurance covers many things but is primarily intended to help financially protect beneficiaries of the policy upon the policyholder’s death. Things like expired policies, fraud, criminal activity and certain exclusions outlined by insurance carriers are not covered.

Who needs life insurance?

Anyone concerned with what will happen after they pass away should consider life insurance. Those who worry about leaving loved ones with a financial burden, such as debt or burial costs, should also consider life insurance.

Written by
Cynthia Paez Bowman
Personal Finance Contributor
Cynthia Paez Bowman is a finance, real estate and international business journalist. Besides, her work has been featured in Business Jet Traveler, MSN,, and She owns and operates a small digital marketing and public relations firm that works with select startups and women-owned businesses to provide growth and visibility. Cynthia splits her time between Los Angeles, CA and San Sebastian, Spain. She travels to Africa and the Middle East regularly to consult with women’s NGOs about small business development.