How to Get a Life Insurance Policy on Someone

Life insurance is a financial contract designed to provide a monetary payout to designated beneficiaries upon the death of the insured individual. This payout, known as a death benefit, offers financial protection for expenses like lost income, debts, or educational costs, ensuring financial stability for loved ones. While often purchased for oneself, it is also possible to obtain a life insurance policy on another person, provided specific requirements are met. This process requires adherence to legal and ethical considerations.

Establishing Insurable Interest and Consent

A fundamental requirement for obtaining a life insurance policy on someone else is demonstrating “insurable interest.” This means the policy owner would experience a financial loss if the insured person died. Without this financial connection, an insurance policy cannot be legally obtained, as it would resemble a speculative wager rather than a protective measure.

Common examples of relationships that satisfy the insurable interest requirement include spouses, business partners, and situations where one person is financially dependent on another, such as a parent insuring an adult child who contributes to household income. Creditors may also have an insurable interest in a debtor, or an employer in a key employee, due to financial obligations or business continuity concerns. This requirement prevents misuse of life insurance and ensures policies are issued for genuine financial protection.

Beyond insurable interest, the explicit consent of the person to be insured is required for adult individuals. The insured must be fully aware that a policy is being taken out on their life and must sign the application form, giving permission. Obtaining a policy without consent is fraudulent and illegal, except for minor children where a parent or legal guardian can provide consent. The consent process often involves the insured undergoing medical examinations.

Preparing Required Information and Documentation

Once insurable interest and consent are established, gathering specific information and documentation is the next step. This preparation streamlines the process and ensures all necessary data is available for the insurer’s assessment. Details are required for the insured individual, the policy owner, and the designated beneficiaries.

For the insured person, personal and health information is necessary. This includes their full legal name, date of birth, Social Security Number, and current address. Insurers also require medical history, including past and current diagnoses, prescriptions, surgeries, and recent doctor visits. Lifestyle habits, such as smoking, alcohol consumption, and hazardous hobbies, are requested as they influence risk assessment.

Information about the policy owner, if different from the insured, and the beneficiaries must also be prepared. This includes their names, relationship to the insured, and contact information. For beneficiaries, their Social Security Number and date of birth may be requested. These details are crucial for the application form, providing the insurer with a complete picture for evaluation.

Navigating the Application and Underwriting Process

With all necessary information prepared, the application and underwriting process begins. This phase involves submitting the gathered data to the insurance company and undergoing risk assessment. The application can be submitted through online portals, paper forms, or with an insurance agent.

A common part of this process is a medical examination for the insured. This exam is arranged and paid for by the insurer and can be conducted at the applicant’s home or office. The medical examination includes a questionnaire about health and family medical history, along with physical measurements such as height, weight, pulse, and blood pressure. Depending on the policy amount and the insured’s age, blood and urine samples may be collected for testing to check for conditions like high cholesterol, diabetes, or drug use. An electrocardiogram (EKG) or other specialized tests might be required in some cases.

Following the application and any required medical exams, the information enters the underwriting review phase. Underwriters assess the risk based on collected data, including medical records, financial background, lifestyle, and occupation. This review determines the insured’s eligibility for coverage and the appropriate premium rates. The process ensures the proposed coverage aligns with the applicant’s financial situation and that the premium reflects the assessed risk.

After the underwriting review is complete, the insurer makes a decision regarding the policy. This can result in approval, potentially with a specific risk class that dictates the premium, or a counter-offer with adjusted terms or higher premiums if the risk is deemed greater than initially presented. An application may be denied.

If approved, the policy is issued, and the initial premium payment is required to activate coverage. Life insurance death benefits paid to beneficiaries are generally not subject to income tax. However, any interest earned on the death benefit while held by the insurer, or if the policy was transferred for valuable consideration, may be taxable.