Can I Take Life Insurance Out on My Partner?

Life insurance serves as a financial safety net, providing monetary support to loved ones after an individual passes away. A common question is whether one can obtain a policy on another person, such as a partner. While permissible, specific requirements must be followed to ensure the policy is valid.

Understanding Insurable Interest

“Insurable interest” refers to the legitimate financial or emotional connection a person has to the individual whose life is being insured. This concept is a fundamental legal requirement designed to prevent speculative policies. The primary purpose of insurable interest is to ensure that the policy owner would experience a genuine financial or emotional loss if the insured person were to die.

An insurable interest must exist at the time the policy is purchased. This principle aligns the policy owner’s interests with the insured’s well-being, preventing scenarios where a policyholder might benefit from harming the insured. Without insurable interest, an insurance contract could be viewed as a form of gambling rather than financial protection, which is contrary to the principles of insurance.

Establishing Insurable Interest with a Partner

This interest arises from the financial interdependence and mutual support within the relationship. For legally married spouses, insurable interest is generally presumed due to the inherent financial ties and shared responsibilities of marriage. Proof of marriage, such as a marriage certificate, usually suffices to establish this connection.

For partners who are not legally married, such as registered domestic partners, common-law partners, or fiancés, establishing insurable interest often requires demonstrating clear financial ties. This can include shared debts like a mortgage or car loan, joint ownership of property, shared household expenses, or mutual financial support. The key is to show that the applicant would suffer a financial hardship if their partner were to pass away, such as the loss of income or increased financial responsibilities. Insurers may require documentation like shared leases, joint bank accounts, or proof of shared parental responsibilities to verify this financial connection.

The Application Process for a Partner’s Policy

Applying for a life insurance policy on a partner requires cooperation from both individuals. The explicit knowledge and written consent of the person being insured is essential. The proposed insured must sign the application form, confirming their agreement to be covered. Without this consent, a policy cannot be issued.

During the application, both the policy applicant (the person seeking the policy) and the proposed insured (the partner) provide personal information. This includes identification details, financial information for the applicant, and health information for the proposed insured. The proposed insured may need to undergo a medical examination to assess risk and determine premiums. The insurer uses this information to underwrite the policy and determine coverage eligibility and rates.

Key Aspects of Policy Ownership

Once a life insurance policy on a partner is established, three roles are involved: the policy owner, the insured, and the beneficiary. The policy owner purchases and controls the policy, holding all rights and responsibilities. This person pays premiums and has the authority to make decisions such as changing beneficiaries, modifying coverage amounts, or surrendering the policy.

The insured is the partner whose life is covered by the policy; the death benefit is paid upon their passing. While the policy owner and insured can be the same person, they are distinct roles when one takes out a policy on another. The beneficiary is the person or entity designated to receive the death benefit when the insured dies. The policy owner designates primary and contingent beneficiaries, specifying how proceeds will be distributed. It is important to note that while the policy owner must have an insurable interest at the policy’s inception, the beneficiary does not necessarily need to have an insurable interest at the time of the claim.