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Can you take a life insurance policy out on anyone?

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You cannot take out a life insurance policy on anyone, but there are situations where you can take out a policy on someone other than yourself. Life insurance is a financial planning tool that provides a payout to designated beneficiaries after the insured’s death. Most people purchase a policy to help plan for their death and leave their dependents and loved ones with a financial cushion.

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 regulatory guidelines that need to be followed before purchasing a policy on someone other than yourself.

How a life insurance policy works

When purchasing a life insurance policy, there are three parties involved:

  • Policyholder: The policyholder is the owner of the policy, makes premium payments and is authorized to make changes.
  • Insured: This is the person whose life is insured by the policy. The policy’s death benefit will typically be paid out upon the insured’s death, if the death occurs within the policy period and there are no reasons for the death benefit not to be paid such as fraud, criminal activity or non-payment of premium.
  • Beneficiary: This is the person or people listed on the life insurance policy who will receive the death benefit when the insured dies. Beneficiaries can also be trusts, estates or organizations.

Often, the insured and policyholder are the same person. However, there are situations where someone may want to take out a life insurance policy on another person. Bankrate’s insurance editorial team has conducted research to help you understand the process of taking out a life insurance policy on someone else.

Can you take out life insurance on anyone?

To take out a life insurance policy on someone other than yourself, you must have a financial stake in their life. It is impossible to take out a 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 is not financially prudent for life insurance providers to underwrite this type of coverage.

It is possible to take out life insurance on someone else only if there is some relationship between you, such as a 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 financial impact on the person who wants to purchase the policy.

Who can you take out a life insurance policy on?

You may be able to take out a life insurance policy on someone else if you have the following relationships, as long as you would suffer a financial loss if they passed away:

  • Adult child
  • Business partner
  • Child
  • Former spouse or life partner
  • Grandparent
  • Minor child (under age 18)
  • Parent
  • Sibling
  • Spouse or life partner

However, you must be able to demonstrate that the person’s earning potential impacts your life. For example, you likely will not be able to take out a policy on a friend whose finances do not have any affect on your life. But you probably can take out a policy on a spouse, whose income you rely on. Keep in mind that you will need the person’s permission to take out a life insurance policy on them.

How to get life insurance for someone else

While each insurance company’s underwriting processes are different, there are a few common steps you will need to take to purchase life insurance for someone else.

Select a type of life insurance policy

The first decision is whether permanent or temporary coverage is necessary. Term life insurance is generally 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 so it is beneficial to obtain multiple quotes, according to the Insurance Information Institute (Triple-I).

Get permission

Once it’s time to apply for coverage, 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 are insuring could be considered insurance fraud.

Prove you have an insurable interest

You have an insurable interest in someone’s death if you will suffer a financial loss when they pass away. If you do not have insurable interest in the person you plan to insure, you cannot purchase a life insurance policy on them.

Most familial relationships are easy to prove when checking medical or personal history and interviewing the insured. However, in cases like business partnerships, life partnerships and non-legally binding relationships, proof of insurable interest may be required. This could include health care documents or other proof of life partnerships, business contracts or other documentation to prove the relationship and that there is an insurable interest between the policyholder and insured.

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 significant assets such as a home, a life insurance policy could make up for 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 their 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 business partners or key employees can sometimes endanger a company’s operations. 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 so that it can remain viable.

Guaranteed future coverage

Some families have a history of genetic conditions and chronic illnesses 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 for their entire lifespan, 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. Getting quotes from several different life insurance companies could help you find the policy type, terms and premium that fits your needs.

What factors are most important when choosing a life insurer?

When selecting a life insurance carrier, there are several important factors to consider, according to the Triple-I. These factors include the company’s financial stability, market reputation, claims-paying record, product offerings and premium price.

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. Expired policies, failure to pay premium, fraud, criminal activity and certain exclusions outlined within the policy can lead to nonpayment of the death benefit.

Who needs life insurance?

Anyone concerned with what will happen after they pass away may want to consider life insurance. Those who worry about leaving loved ones with a financial burden, such as mortgage payments, auto loans, credit card balances, college tuition or burial costs, might also consider life insurance.

Written by
Cynthia Paez Bowman
Personal Finance Contributor
Cynthia Paez Bowman is a former personal finance contributor at Bankrate. She is a finance and business journalist who has been featured in Business Jet Traveler, MSN,, and
Edited by
Insurance Writer & Editor
Reviewed by
Director of corporate communications, Insurance Information Institute