Can I take out an Insurance Policy on someone else's life?
What is an insurable interest'?
To prevent people from taking out a life insurance policy on the life of a stranger and then killing them to get the life insurance proceeds, or having life insurance become a gambling device -- ''I'll pay you $500 now and if Donald Trump dies in the next two years you'll pay me $25,000" - persons purchasing a policy must have an "insurable interest" in the life of the person being insured
The person taking out a life policy should have some financial interest in the survival of the person whose life is to be insured, or be likely to suffer financial loss on that person's death. This is called insurable interest. Although insurable interest is not now required by law, life companies will still take a close look at policies applied for where insurable interest is not evident.
The transfer of policy ownership from one person to another. Policies are often assigned to a bank to provide security for a loan.
In dealing witll life insurance, an "insurable interest" generally means a substantial interest engendered by love and affection in tile case of persons related by blood, and a lawful and substantial economic interest in the continued life of tile insured in other cases. People are always considered to have an insurable interest in their own lives, and generally also have an insurable interest in the lives of their spouses and dependents. Business partners rnay have an insurable interest in each other, and a corporation may have an insurable interest in its employees' lives, particularly key employees.
INSURABLE INTEREST: in relation to insurance, the law prevents people taking out an insurance contact on someone else's life unless they have a legal or financial insurable interest in that life. This concept of insurable interest was established to prevent gambling on the lives of others and the taking out of Ufe insurance of someone else's life and then arranging for that person to die.
- Last updated on .