If you’ve ever shopped about for a life insurance policy, or have purchased a life insurance plan on a loved one, then you’ve run into the term “insurable interest,” but you may not know exactly what it means. If you’re looking to get a life insurance plan on a family member or business partner, it’s important that you understand insurable interest and how it’s going to impact your life insurance protection.
This article is going to look at the insurable interest in the context of life insurance, but insurable interest is going to pop up in every type of insurance policy that you buy. Because of all of the terms and jargon in the insurance business, it can be confusing trying to navigate through the insurance waters, but InsuranceCored.com is here to help.
Defining Insurable Interest
Before you can purchase a life insurance policy on someone other than yourself, you’ll be required to prove that you have an insurable interest. This is the idea that if that person was to pass away, that you would suffer financially. Typically, this tends to be a spouse or a parent. With a spouse, the insurable interest is obvious, if they were to pass away, you would no longer have their annual income, and you would suffer financially if you have to pay for child care.
For a parent, the insurable interest is also simple to defend, because more than likely, you’ll be responsible for their debts and paying for all of their final expenses if anything tragic were to happen to them. With the same example, you’ll have to prove how much insurable interest that you have. You won’t be able to purchase a $2 million life insurance plan for a parent that doesn’t hold any debt and won’t create that large of a financial burden on you. You’ll need to prove just how much insurable interest that you have with the loved one.
Another example of defending insurable interest is if you’re looking to get a life insurance plan on a business partner or a key employee in your business. If something tragic were to happen to a business partner or one of the main employees in your business, then your organization would suffer drastically. In fact, if your business partner passed away, then your business could end up having to shut down because of the financial strain that it would put on you and the company. Because securing the future of your organization is so important, a lot of insurance companies offer “key man” insurance policies, which are specifically designed to protect the financial future of your organization.
Getting Affordable Life Insurance Coverage
After you’ve proven that you have an insurable interest in your life insurance coverage, it’s important that you get the most affordable insurance plan available. One of the most common reasons that people don’t have life insurance coverage is that they assume that a plan is going to be too expensive. Regardless of who you’re buying the plan for, and the need for insurable interest, there are several ways that you can get affordable insurance protection.
If you’re buying a life insurance policy on your spouse or a business partner, the insurance company is going to require that the other person take a medical exam unless you have chosen to purchase a no exam life insurance plan, which will come with a higher premium rate. Getting better results on the medical exam is going to lower the premiums for the insurance policy. Encouraging the insured person to get in better shape can save you hundreds and hundreds of dollars every year.
Another way to save money on your life insurance plan is to help the insured person kick the cigarettes. When you apply for the life insurance policy, the insurance company is going to be very interested in any tobacco usage. If the insured person is a smoker, then you’re going to pay a lot more every month for the life insurance coverage. In fact, if the insured person is a smoker, the premiums are going to be at least twice as much versus what you would pay to cover a non-smoker.
The best way to ensure that you’re getting the lowest rates is to compare dozens and dozens of plans before you decide which one is going to work best for you. Every insurance company is different, which means every company is going to offer you different rates depending on their medical underwriting and rating system. Finding the perfect company can be the difference in getting an affordable life insurance policy or having a plan that breaks your bank every month.
There are hundreds and hundreds of different companies on the market, which means you can spend weeks calling different agents to find the best plan. Instead of wasting hours and hours on the phone, let one of our independent insurance brokers do all of the hard work for you. Unlike a traditional insurance broker, independent agents represent dozens and dozens of highly rated companies across the nation. Our experienced insurance agents have years of experience working with all types of applications and different companies across the nation.
You never know what’s going to happen tomorrow, which means you shouldn’t wait any longer to get the insurance protection that you and your loved ones deserve. If you have any questions about insurable interest or how you can get the lowest insurance coverage available, please contact us today. We would be happy to answer those questions and connect you with the best plan.