Do You Need Permission to Get Life Insurance on Someone?

Obtaining life insurance on another individual generally requires their permission. Life insurance policies are structured around principles that necessitate a valid reason for the policyholder to receive a financial benefit from the insured person’s death. This framework prevents financial speculation and ensures policies serve their intended purpose of providing financial security.

Understanding Insurable Interest

A foundational requirement for obtaining a life insurance policy on another person is demonstrating “insurable interest.” This concept refers to the financial or emotional stake one individual has in the continued life of another. Its primary purpose is to prevent the use of life insurance for speculative purposes or to create a financial incentive for harm. For a policy to be valid, insurable interest must exist at the time the policy is purchased.

Common examples of relationships that typically establish insurable interest include spouses. Parents generally have an insurable interest in their minor children, and adult children may have an interest in their parents, especially if there’s a financial dependency or a need to cover end-of-life costs. Business partners also commonly possess insurable interest in one another, as the death of one partner could lead to significant financial loss or disruption for the business. A creditor may also have an insurable interest in a debtor, limited to the amount of the outstanding debt.

When Consent is Necessary

Even when insurable interest exists, obtaining explicit consent from the person being insured is almost always required for adults. This consent protects their privacy and helps prevent fraudulent activities, ensuring they agree to the policy. The process involves the insured person signing the life insurance application form. They may also be required to participate in underwriting, which can include answering personal health questions and undergoing a medical examination.

In some limited circumstances, explicit consent might not be required, such as when parents obtain a policy on a minor child where insurable interest is inherent. For employer-owned life insurance policies, Internal Revenue Code Section 101 requires written notice and consent from the employee before the policy is issued. This ensures the death benefit remains tax-free for the employer. For most adult individuals, direct and documented consent is a fundamental step in the life insurance application process.

Repercussions of Non-Compliance

If a life insurance policy is obtained without the necessary insurable interest or the required consent, it is considered “void ab initio,” meaning it was invalid from its inception. This renders the policy unenforceable, and it will not pay a death benefit. Insurers have mechanisms in place to verify both insurable interest and consent during the application and claims processes.

A lack of insurable interest is against public policy, as it could create an incentive for harm. When a policy is found to be void due to lack of insurable interest or fraudulent misrepresentation, premiums paid may be forfeited by the policyholder. Attempting to secure a policy without consent or valid insurable interest could lead to legal consequences, including charges of insurance fraud.