Policy Ownership on Someone Else- Insurable Interest

From time to time, I receive requests for insurance on another person. The question of insurable interest is addressed to those who have absolutely none. Insurable interest exists when an insured person derives a financial or other kind of benefit from the continuous existence of the insured. In some cases this can be confusing to a consumer.

To make it simple: Do not pursue starting a contract of insurance without consent of the adult insured. 

When asked "Can I take out a policy on by boyfriend without telling him?"

The answer is "No, you cannot."
"But we live together.. I like the quote, and I will pay for the policy."
"True, but why are you trying to insure him without his knowledge?"
By reading the last question, you should understand why insurable interest has to be addressed.

A person is allowed to pay for a policy on someone else's behalf, but making herself the owner and beneficiary without the insured's knowledge could seem to be suspicious behavior, though not intended. It is also illegal for an Agent to write the policy without seeing the adult insured and obtaining signatures.

Would you be disturbed learning that someone randomly started a $100k insurance policy on your life without asking permission?

The boyfriend has to apply for the coverage himself and then specify his girlfriend to be a beneficiary to the writing/witnessing agent. I used this example because it is so very common and can confuse people. Yes, the two live together, and he financially supports the household, but relationships end everyday. Marriage is legal just like insurance. He could sign for his girlfriend to be the owner out of his own free will after the policy issues, but this is rare.

Most policies do not need to specify an owner as it is automatically the insured. "Ownership" means being the person to manage and make changes to a policy without the need for the insured.

Who is commonly considered to bear insurable interest?
Parents/ Legal Guardian
Grandparents
Spouse (Common-law marriage is no longer acceptable in many states.)
Business Owner/ Company (Key Employee- a different subject for a later post.)
These individuals may apply for coverage for someone else, pay the premium, and be listed as beneficiary.

Paying the policy premium does not declare ownership. The designation for this is "Payor" only.
The signature of a child is not required.
A policy can be taken out by an adult child on a parent, but the parent must be able to sign acknowledgement. Such as taking out a policy on your father.

Underwriters have to question the intent of people taking out insurance on an individual to prevent fraud and misunderstanding. It is also the law.

Special circumstances apply for Aunts and Uncles if the child is also a dependent. Otherwise the owner would be the child's parent if specified and the Aunt would be the payor.

Most policies do not require to specify an owner, but for policies earning dividends, it may be desired.
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