How to Get Life Insurance on Someone

Life insurance offers financial protection to beneficiaries upon the death of the insured individual. While most people obtain life insurance on their own lives, it is also possible to secure a policy on another person. This process involves distinct legal and practical considerations that differ significantly from insuring oneself. Understanding these requirements is important to navigate the complexities of obtaining coverage for someone else.

Establishing Insurable Interest and Consent

Obtaining a life insurance policy on another person requires demonstrating what is known as “insurable interest,” a foundational legal principle. Insurable interest means the policy owner would suffer a financial or emotional loss if the insured person were to die. This requirement prevents speculative policies and reduces moral hazard.

Spouses typically have an inherent insurable interest in each other, stemming from shared financial responsibilities and mutual support. A parent also generally holds an insurable interest in their minor child, reflecting the financial and emotional investment in their upbringing.

Business partners often possess insurable interest in one another, particularly if the death of one partner would cause significant financial disruption or loss to the business. This can be critical for business continuity, allowing the surviving partners to buy out the deceased’s share or cover operational losses. Similarly, a creditor may have an insurable interest in a debtor, limited to the amount of the outstanding debt, ensuring repayment if the debtor passes away.

Beyond demonstrating insurable interest, the explicit consent of the insured person is required. This consent upholds principles of privacy and bodily autonomy, ensuring individuals are aware and agree to a policy being taken out on their life. It also serves as a crucial safeguard against fraudulent activities.

Consent is typically obtained directly through the application process itself. The insured person is usually required to sign the application form, acknowledging their agreement to the coverage. Furthermore, they will often need to participate in any required medical examinations and provide written authorizations for the release of their medical records to the insurance company.

Policies obtained without proper insurable interest or explicit consent are void and will not pay out. This can result in lost premiums and legal complications.

Gathering Necessary Information

Once insurable interest and consent are established, the next step is gathering information for the application. This data is divided between the policy owner, who applies for and pays the premiums, and the insured person, whose life is being covered. Accurate information is important for a smooth application.

From the policy owner, the insurance company will require full legal name, current address, and date of birth to verify identity. A Social Security number is also necessary for identification and tax reporting purposes related to the policy. Financial details, such as income and existing assets, may be requested to help justify the requested coverage amount and demonstrate the financial capacity to maintain premium payments.

For the insured person, a comprehensive set of personal, medical, and lifestyle details is collected. This includes their full name, date of birth, and Social Security number for identification. A detailed medical history is critical, encompassing past and present medical conditions, current medications, and the names and contact information of treating physicians.

Information regarding family medical history, particularly concerning major diseases, is also typically requested to assess genetic predispositions to certain health issues. Details about the insured person’s occupation, hobbies, and lifestyle habits, such as smoking, alcohol consumption, or participation in hazardous activities, are also important. This information helps the insurer evaluate potential risks associated with their daily life.

This information, especially medical and financial details, is important for the underwriting process. Underwriters use this data to assess risk, determine eligibility, and set premium rates.

The Application and Underwriting Process

After gathering information and completing the application, the next phase involves submission and underwriting. Applications can be submitted through a licensed agent, online portal, or by mail. The method depends on the insurer and policy complexity.

Underwriting is the insurer’s risk assessment process, reviewing all information provided in the application. This includes the personal, medical, and financial data of both the policy owner and the insured person. The goal is to evaluate the level of risk associated with insuring the individual and to determine if they are eligible for coverage and at what premium rate.

A medical examination is common during underwriting, especially for higher coverage or if health disclosures warrant investigation. This exam involves a physical assessment, blood and urine samples, and sometimes an electrocardiogram (EKG). Results provide objective health data for risk assessment.

Underwriting review can lead to various outcomes:
Approval at standard rates if the insured person’s health and lifestyle fall within typical parameters.
Approval with higher premiums if certain risk factors, such as pre-existing health conditions or hazardous occupations, are identified.
Postponement if medical information is incomplete or if the insured is undergoing treatment for a condition that needs to stabilize.
Denial if the risk is deemed too high, such as in instances of severe health issues or a history of significant medical non-compliance.

Following approval, the policy is delivered to the owner, who has a free-look period (often 10 to 30 days) to review terms and decide whether to proceed. Regular premium payments, which can be monthly, quarterly, or annually, then begin to keep the policy in force. The process, from application to policy issuance, can take weeks to months, depending on complexity and responsiveness.