Syndicated Financial Columnist, Host of the weekly talk show Steve Savant's Money, the Name of the Game, Scottsdale Arizona
Life insurance is a mortality product designed to protect the beneficiaries from economic harm based on the death of the policy insured. There must be an established financial interest between the policy beneficiaries and the policy insured or the contract will not be issued. The policy insured must sign the life insurance application to agree to coverage on their life. The amount of coverage must also be justified through financial supported data.
No, people cannot put life insurance on anyone. Life insurance cannot be used to profit from another's death. So there must a financial relationship between the Owner/Beneficiary of the policy and the Insured, in which the death of the Insured would cause financial loss to the Owner/Beneficiary. E.g. A mother could take out a policy on her wayward adult son who owes her money, but that son coulld not take out a policy on his mother to get even more money out of her.
No, in order to purchase life insurance on someone's life you must have an insurable interest. This means that you must be able to demonstrate that there death would cause a financial loss to you.
Further, when it comes to an employer's purchasing life insurance on an employee, additional requirements have been implemented forcing employers not only to prove that they would incur a loss, but that the employee is also aware of the purchase and consents to it.
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Further, when it comes to an employer's purchasing life insurance on an employee, additional requirements have been implemented forcing employers not only to prove that they would incur a loss, but that the employee is also aware of the purchase and consents to it.