Can Life Insurance be Taken Out on Another Person Legally and Does the Other Person Have to be Notified About the Policy?
Life Insurance-related crimes are one of the things that you would probably think about whenever an insurance policy contract is contested especially when it involves a great amount of money. Life insurance is intended for financial protection for the ones you love but its purpose is at times defeated when it is purchase out of unlawful and greedy intentions.
Over the years and after many fraudulent polices discovered, denied and have placed criminals in jail, insurance companies are more than vigilant in evaluating and approving every insurance application. People buy insurances for different reasons and situations. You can legally buy a life insurance on yourself and make your parents, spouse or children the beneficiaries. But can life insurance be taken out on another person legally and does the other person have to be notified about the policy?
The answer to this question can be a yes and can also be a no. Yes, it is possible to buy an insurance policy without the person insured knowing it. But this is only legal to parents who buy life insurance policies to their minor child. The law doesn’t allow anyone from taking out a life insurance on someone he has no insurable interest on except if the one insured is a minor. But this exemption is only applicable to parents who purchase life insurance to their children. If an insurance policy is bought by a relative who stated his name as the beneficiary in the insurance contract without the parent’s knowledge and this relative has not contributed in raising the child, the relative will in no way have a chance of getting the insurance proceeds in case the child dies. This clearly shows that the relative has no insurable interest on the child and failure of the insurance company to exercise reasonable diligence by keenly investigating during insurance application can held them liable.
On the other hand, life insurance cannot be taken out on another person legally in the absence of insurable interest and knowledge of the person about the insurance. Jointly owned assets and wills are considered proofs of insurable interest. If for example your husband transferred the ownership of his insurance policy during your marriage and you ended up paying for the premiums after divorce, you are considered to have an insurable interest on him. It can also be established based on relationships that people have with each other like a relationship from parents to children. Insurable interest is a very simple insurance policy pre-condition to prove if it really does exist. Lack of insurable interest is a legal ground which constantly contributes to alarming rate of crimes involving fraudulent insurance policies. You should also let the person know about the insurance. For married couples, the wife can enroll his husband in a life insurance policy stating her name as the primary beneficiary and the children as contingent beneficiaries but of course she has to let him know and agree about the policy. It is not quite possible to have someone insured without his consent especially during insurance application. Although there are small insurance companies who don’t require medical exams it is nevertheless necessary during insurance application for the insurance agents to evaluate the health conditions of the insured. This would necessarily mean personal appearance on the part of the person the policy will be taken out on during the insurance policy application. There will also be signing of documents and other procedures which insurance agents need to follow. Failure to act in accordance with the prescribed insurance policy standards and procedures on the part of insurance agents is considered felonious and punishable by law.