If you are wondering if someone else can approach an insurer and take out life cover for you, you are not alone. There are many reasons why someone will take out a policy on behalf of someone, but is it legal?
Are there conditions in place before someone can do this? Here is what you need to know.
Can someone take out a policy for you?
It’s a complex question, but the answer is yes, legally, you can take out cover on behalf of someone else – provided you have an insurable interest. This will also depend on the specific insurer. It's not a straightforward process where you can claim to know someone and have a policy written in their name. There are a few considerations you will have to keep in mind.
What is insurable interest?
Insurable interest is when an insurer will ask you to provide proof that someone will be negatively impacted should the person who is being insured pass away. This could be in a financial sense, for example, the support that they offer you and the role that they play will have far-reaching financial consequences should they die. There may be instances where someone would like to take out a policy for their parent, business partner, or even employees. Therefore, insurable interest will need to be provided before an insurer can approve the policy.
Personal questions & documents
For security reasons, you will be taken through the underwriting process. The underwriting process is a list of questions which you will need to answer truthfully to process your life cover application. It also means that the person who plans on taking out a policy in your name will need a range of personal information that you have shared with them to have the application processed. Insurers will ask you questions relating to your:
These questions are asked to assess what cover will be best suited to you and your needs. It is crucial that these are answered truthfully as making up information can lead to a claim being denied when it is time to process a claim.
You may not be listed as a beneficiary
For someone to take out a life insurance policy on your behalf, they will need to prove insurable interest, even if they are related to you. Even if you are someone who is planning on taking out a cover for your parents, you will need to prove insurable interest. You can be the person who pays for the policy and has the policy written in someone else's name, making them the policyholder, but it does not guarantee that you will receive the payout when they die. It's also worth noting that if you pay for life cover for a loved one, the life assured still has the choice of who the beneficiaries are - which means that they could theoretically choose not to have you as a beneficiary.
