Can I Purchase Life Insurance for Someone Else?
Life insurance doesn’t have to be purchased only on yourself. You can take a policy on others, but there are certain stipulations…
The purpose of Life insurance is to provide financial protection for your family and loved ones. Although you are able to take a life insurance policy out on someone other than yourself, there are a few key restrictions.
First, you need insurable interest, which means that you have a financial relationship with the proposed insured. Generally, those who would have insurable interest are spouses, children, and business partners.
Second, the person that you are getting insured must be aware. Taking a life insurance policy on someone without their knowledge or permission is called “stranger-originated life insurance” (STOLI) and is completely illegal. Be careful because you may face legal consequences.
Why would you want to take a policy out on someone else?
Financial security-
If the person you are getting a policy on is the breadwinner or a significant player in a business, their death could have a major impact on you, the policyholder. Taking an insurance policy out on the person being insured would provide you and the family with financial protection.
Business Reasons-
If you have partners that together own a business, and one of them dies, you have the opportunity to use the proceeds of the policy to buy out the deceased partners’ portion of the company.
Estate Planning-
You can use life insurance as a means for estate planning so that if the policyholder wants to leave an amount of money to a beneficiary or charity after they pass, finances will be available to carry out these wishes.
Overall, although you can take out a life insurance policy on someone else, it’s critical to make sure that you have an insurable interest in their life and that the person you are looking to insure gave you permission to do so.
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About Pivotal Life Insurance
Pivotal Life Insurance is a family owned, independent insurance agency that focuses on income protection and family security through Life Insurance products (Term Life, Whole Life, Final Expense), Mortgage Protection and Annuities. With a range of product offerings, we accommodate the varying needs of our clients through resources provided by the nation’s top rated carriers. Although we are headquartered in South Florida with a branch in Maryland, we service most of the United States as our agents are licensed throughout the country. Pivotal Life Insurance is one of the fastest-growing agencies and we pride ourselves in putting you, our customers, first.
Insurance Is Pivotal. Family & legacy are worth protecting. Cherish what’s important.
