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Life insurance is usually used to cover your own death and to provide for your spouse and dependents. But you can also get life insurance on someone else. Spouses and couples typically have life insurance policies on each other, for instance, and grandparents can even get life insurance for their grandchildren.  

You can’t open a life insurance policy on just anybody, though. There are some requirements you’ll need to meet before you’re approved for coverage.

Can you get life insurance on someone else?

To get life insurance for someone else — your spouse, parents, children, or business partner — you need two things: (1) an insurable interest in their lives, and (2) their permission.

An insurable interest in someone’s life means you will suffer financially if they die. Since you aren’t the insured person when you buy life insurance on someone else, you need to demonstrate this insurable interest in order to take out the insurance policy.

According to Mark Williams, CEO of Brokers International, insurable interest is what allows business partners to protect their business. For example, if you own a family business with your parents, you would have an insurable interest as business partners.

If you are considered to have an insurable interest in someone else such that you can buy life insurance on them, you should talk to their accountant or financial planner about any potential tax implications before you take out an insurance policy.

You need the person’s permission for the underwriting process

In addition to an insurable interest, you need the person’s permission before you can take out an insurance policy on them. The insurance company will have its own process to prove consent and verify the identity of the person.

Whenever someone applies for life insurance, their application goes through the underwriting process, where the company determines how much of an insurance risk you are how and what death benefit it will provide. If you’re trying to get insurance on someone else, that person has to go through underwriting process too.

During the underwriting process, the insurance company will collect information about the person’s health, job, income, finances, and other personal information. Traditional life insurance policies also require the applicant to submit to a medical exam, which includes the collection of a blood and urine sample.

Who can you take a life insurance policy out on?

Aging parents

Some people do not like to discuss life insurance because it involves confronting mortality. This can be a sensitive topic even if you have a good relationship with your parents, but if you do not get their permission, you cannot buy life insurance on them, even if you have an insurable interest. 

Some insurers will not allow an adult child to take out insurance on their aging parents, so you’ll want to contact multiple life insurance companies to get their policies and quotes. Life insurance premiums are cheaper when you are younger and healthier. If you are trying to buy life insurance on your parents, expect higher premiums and lower death benefit coverage amounts. 

If your parents do not have any life insurance, it might be easier for them to apply for “final expense” life insurance. Final expense is also referred to as burial insurance because the coverage amounts are so low that they basically only cover funeral and burial expenses.

Final expense is a guaranteed issue life insurance that doesn’t require a medical exam. According to ColonialPenn, they typically have a two-year waiting period, meaning that if the policyholder dies within the first two years of having coverage, the policy won’t pay out.

Grandchildren, nieces, and nephews

According to Prudential certified financial planner and life insurance specialist Barbara Pietrangelo, parents aren’t the ones who usually buy child life insurance policies. Instead, the usual are grandparents. She said grandparents use child life insurance to give their grandchildren a financial legacy that can be used towards college, a wedding, home, or first car purchase.

Because minors can’t own life insurance policies, nor can they receive payouts as a minor beneficiary, the adult is the policyholder and manages the account. Once the child turns 18, they can become the policyholder and withdraw or borrow against the policy’s cash value — as most child life insurance policies are whole life insurance.

Although grandparents, aunts, and uncles can purchase child life insurance for grandchildren, nieces, and nephews, they need permission from the parents. They will need the child’s Social Security number and doctor’s information for the insurance the underwriting process to make sure the child is reasonably healthy. 

Married couples and domestic partners

You don’t necessarily have to be married to prove an insurable interest, but it is easier to prove an insurable interest via marriage or a business relationship. If you are in a domestic partnership, you would need to show an insurable interest. It may mean that additional questions and documentation is required during the underwriting process.

Some couples carry individual life insurance policies, naming their spouse as the beneficiary. Others have joint life insurance policies. Individual and joint life insurance policies can be either term life policies that expire after a set amount of time or permanent life policies that never expire. 

Whether you go with individual or joint life insurance, keep in mind that problems can occur if a couple divorces. Typically, a policyholder can change beneficiaries, but you may not be able to simply cancel a policy or remove your ex as a beneficiary. It’s best to discuss what options exist for divorce or legal separation with your agent before signing a life insurance policy.

If you are considering getting life insurance on someone else, discuss your life insurance options with your financial planner, accountant, and estate attorney to make sure you get the best coverage for your needs. And even more importantly, get that person’s permission before tryig to take an insurance policy out on them.