To buy life insurance on other people is certainly possible and can be done.
In fact, there are definite reasons why you can buy life insurance on anyone and you may want to consider all the options you have when considering a life insurance policy on someone else.
Children & Family Members
The most obvious answer and one many of us are familiar with is a life insurance policy on your child. Buying insurance for your family, having everyone covered with a life insurance policy, especially children makes sense. Covering a child means that in case the worst happens, you as the beneficiary can cover the expenses and avoid a financial pitfall when tragedy strikes. There are no restrictions when buying life insurance for your children as well as close family members, particularly those that live in your household.
We also have many clients that are interested in buying life insurance for their parents. The basic same rules apply, you just have to make sure your parent is in good health and they are aware you are buying life insurance on their behalf.
This is commonly used by businesses that purchase life insurance on employees who occupy a hard to replace status within their company. Usually this is the largest stock holder or CEO/CFO of the company where their tragic loss can have a tremendous effect on the business.
In this case, the life insurance can cover the loss and tide over the financial difficulties until everything gets worked out. The “key man” can also be someone else in the company, but it would have to be someone that if he or she were to pass away, the business would literally shut down.
This is where it gets tricky because purchasing life insurance on anyone outside your close family circle or a key individual in a business is the type of idea that you see played out in mystery novels and crime shows. After all, what is your benefit to seeing someone with no real connection to you covered by life insurance unless you can gain monetarily from being the beneficiary when they die?
However, this does not mean it is impossible to buy life insurance on anyone or buy life insurance on other people. You simply have to state a convincing case that it is important that they be covered. That person would then have to agree to submit to health exams and sign the application forms so that they can be covered by you.
In essence, you need their cooperation as well as a convincing story as to why you want to buy life insurance on them. There are situations where having life insurance on another person outside your family or business makes sense, such as two people sharing a home that they are purchasing for example. Having said that, such instances are rare and getting life insurance on another person without their knowledge or consent is frankly beyond the normal bounds of possibilities but it has happened albeit on very rare occasions.
If you are thinking of insuring someone outside your family or business, then you will need their consent and a very, very good reason to tell the insurance company why they should have life insurance.