Life insurance is one of the best purchases that you can ever make for the people that you can about. Having life insurance is a great safety net that you can purchase to ensure that they have the money that they need, regardless of what happens to you and them. You can’t just purchase a life insurance on anybody. There are some requirements that you have to meet to purchase a plan on them.
Most people purchase life insurance for the purpose of protecting loved ones from a potential financial loss if an insured individual should pass away. In doing so, the owner of a life insurance policy is required to name a beneficiary – or beneficiaries – who will receive the insurance policy proceeds upon the individual’s death. When applying for life insurance coverage, it is typically required that the beneficiary have an insurable interest in the person who is being insured.
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What Exactly Does Insurable Interest Mean?
Insurable interest is present when an individual gets a financial or other type of benefit that is based upon the continuous existence of the insured. Therefore, a person has an insurable interest in something or someone when that loss of the insured would cause the person to suffer a financial or other type of hardship or loss.
With regard to a life insurance policy, an insurable interest is based on a relationship whereby there is a common interest in another person continuing to live or a financial loss that would result at that person’s death. Therefore, in order to insure the life of an individual, an applicant for life insurance coverage must have a greater financial concern in the insured living than in them dying.
Having an insurable interest refers to the fact that a policy holder must establish that he or she actually has a financial interest in the person or property that is being insured. Here, the policy holder must face the possibility of a personal risk or loss, and have a legitimate financial interest in preserving the life or property that is being insured. In addition, the insurance coverage that is being applied for should not constitute a personal gain for the policy holder.
It is required that the insured have an insurable interest in any life or property that will be covered in an insurance policy. A policy that does not constitute insurable interest is considered to be void, as well as illegal. This is because the policy would be considered a wager, and could possibly even lead to intentional destruction or harm.
Further, even if it is deemed that an applicant for insurance has an insurable interest in the insured, the consent of the person to be insured is still required before a policy can be issued. The only exception to this is when a parent purchases insurance coverage for a minor child.
When an applicant for insurance is the same person who is insured, there is no doubt that an insurable interest exists. This is because individuals are presumed to have an insurable interest in their own lives.
According to most state laws, each individual has an insurable interest in the life and health of the following persons:
- Himself or herself
- Any person on whom he or she depends on for support or education
- Any person on whose life any estate or vested interest depends
- Any person under a legal obligation to him or her for payment of money, property, or services and whose death or illness could prevent or delay such a payment or performance
Perhaps you have health problems and want to know if insurance can deny you for having pre existing conditions, We can answer your questions and help you get the coverage you deserve.
Additional Forms of Insurable Interest
Family members and loved ones are not the only persons or entities, then, that will have an insurable interest in an insured individual. In addition, insurable interest may not always have to be specifically proven. For example, in most states, there are also situations whereby insurable interest is automatic. These can include:
- Creditors and lenders have an insurable interest in debtors and borrowers (to the extent of the amount of the debt)
- Individuals who are related by law or blood, which include relationships that are based on love, affection, and / or economic dependency
- Employers have an insurable interest in their employees, as well as any other person whose disability or death could cause a financial hardship to the employer or business
- Business partners have an insurable interest in each other
As long as you as the insured person meets one of these requirements, you’ll be able to purchase a life insurance policy on that person as long as you get their consent for the plan. It’s important that you have all of the life insurance coverage that your family needs, in case something tragic were to happen.
If you have any questions about insurable interest or about finding the best plan to meet your needs. There are dozens of different kinds of life insurance plans that you can choose from, and all of them have different advantages that you’ll need to consider when you’re shopping for life insurance.
Our agents have years of experience working with applicants to get them the best plan at an affordable rate. Every insurance company is different, and all of them are going to give you drastically different rates for the same amount of coverage. Regardless of who you’re looking to insure or how much life insurance you will need, it’s vital that you compare quotes from dozens of companies before choosing the one that’s going to work best for you.
You never know what’s going to happen tomorrow, so you shouldn’t wait any longer to get the life insurance plans that you need. If you are in interested in obtaining final expense life insurance quotes or affordable life insurance over 50; we can certainly help. Please contact one of our agents today to get the process started.