Can I Get a Life Insurance Policy on My Dad?

Obtaining a life insurance policy on another individual, such as a parent, involves distinct considerations. While the fundamental purpose of life insurance remains consistent—providing financial protection—third-party policies introduce specific requirements. Navigating these steps carefully ensures the policy is valid and serves its intended purpose of offering security.

Insurable Interest Requirement

A legal principle in life insurance is “insurable interest,” meaning the policy owner must suffer a genuine loss if the insured person passes away. This interest can be financial, emotional, or both, and must exist when the policy is purchased. Without demonstrating insurable interest, an insurance company cannot legally issue a policy, preventing speculative or fraudulent activities.

For a child seeking a policy on a parent, insurable interest is generally recognized due to the inherent relationship. This includes situations where the child would incur financial burdens, such as covering final expenses. An adult child might also have an insurable interest if they provide care for the parent, or if the parent’s death would impact the child’s financial well-being due to shared financial responsibilities or a loss of potential inheritance.

Securing Consent and Policy Application

A key requirement for obtaining a life insurance policy on another person is their explicit, written consent. The proposed insured, such as a parent, must fully agree to the coverage. This agreement typically involves signing specific forms provided by the insurance company, confirming their awareness and approval. The proposed insured will also need to provide personal information and may be required to undergo a medical examination.

Once consent and necessary information are secured, the applicant, who will become the policy owner, can proceed with the formal application. This involves selecting an appropriate policy type, such as term life insurance, which covers a specific period, or permanent life insurance, which provides lifelong coverage. The applicant provides their own details as the prospective policy owner and premium payer. The completed application, along with any required financial documentation, is then submitted for underwriting review.

Understanding Policy Ownership and Beneficiaries

Life insurance policies involve several distinct roles: the insured, the owner, and the beneficiary. The “insured” is the person whose life is covered by the policy, and whose death triggers the payout. The “owner” is the individual or entity who controls the policy, pays premiums, and makes decisions regarding the policy, such as changing beneficiaries or surrendering the policy. While the insured and owner are often the same person, in the case of a child insuring a parent, the child typically assumes the role of policy owner.

The “beneficiary” is the person or entity designated to receive the death benefit when the insured passes away. The policy owner has the authority to designate and change beneficiaries, unless an irrevocable beneficiary has been named. The beneficiary does not need to have an insurable interest at the time of the claim; this requirement applies solely to the policy owner at the policy’s inception. Life insurance death benefits are generally not subject to federal income tax for the beneficiary, though interest earned on installment payments may be taxable.

Factors Affecting Policy Cost

The cost of a life insurance policy, known as the premium, is determined by various factors primarily related to the insured person’s risk profile. Age is a significant determinant, with younger individuals generally receiving lower premiums because they are considered less likely to experience health issues in the short term. Conversely, premiums typically increase with age due to the increased likelihood of health complications.

The insured’s health status and medical history also play a substantial role in premium calculation. Insurers assess current health conditions, past illnesses, and prescription medications, often requiring a medical examination that may include blood and urine samples. Lifestyle choices, such as smoking, excessive drinking, or participation in high-risk hobbies like skydiving, can significantly increase premiums due to the elevated risk they present. The chosen coverage amount and policy type also directly influence the premium, with higher coverage amounts leading to higher costs.