If you plan to take out life insurance for someone other than yourself, your provider will need evidence of a relationship between you two and how you would suffer financially if the other person dies. However, it may be impossible to take out a life policy for someone without their consent except in rare instances. If you intend to take out life coverage for your parents without their knowledge, you must have a power of attorney to make that decision.
What Is Insurable Interest?
Insurable interest is the degree of hardship or difficulty that the beneficiary will suffer should the insured person die. To confirm that an insurable interest is present, the company will reach out to the policy owner, beneficiary, and insured. A thorough investigation will be conducted to ensure that an insurable interest is present before moving on with the decision.
Here are a few instances when you might consider taking out life insurance on someone else
Where you are going through a divorce, the judge may mandate that you and your ex-spouse should take out this coverage with the other party listed as a beneficiary. Usually, this requirement is to ensure financial protection for the children should anything happen to either of the parents. In some cases, one of the parents may be financially irresponsible or refuse to adhere to the judge’s order, so the willing party can decide to take over the policy and include the erring party. It is advisable to consult your legal practitioner before making this decision.
Cosigner to a Loan
Cosigning a loan means taking up responsibility for the repayment of a loan in case the borrower dies. Cosigning may be done out of goodwill and trust to help a friend or family member, but it puts you at risk. Here, you can take out this policy on behalf of the friend to cover the amount and duration of the loan. This helps put your mind at ease and prevents financial difficulties should the person die. Ideally, the person who asked you to cosign should be willing to taking out a policy themselves, but if they refuse, taking out a policy to cover them is a good option.
Cover Funeral Expenses
If a loved one dies without leaving any savings for burial arrangements, and you are likely to be held responsible for the expenses, this can cause significant financial hardships. If you can prove your insurable interest, in this case, you may be able to take out this coverage covering the amount needed for final arrangements.
It is always a good idea to buy life coverage for you, your partner, and your parents to ensure financial security after an unexpected loss.
At Weaver & Associates, we can help you purchase the right life insurance policy for your loved ones. Visit us today to get started!