Can You Buy Life Insurance for Family Members?

You probably know that taking out a life insurance policy for yourself is a smart financial step. You may not want to think about your own death, but it can give you and your family peace of mind to know that they’ll have the money they need to cover bills and major expenses if you’re no longer with them.

But what about other people? Can you buy life insurance for family members – like your parents or children?

The answer is yes. In fact, you can take out life insurance on a range of people, but you have to meet some requirements. And you can’t buy life insurance for just anyone. Here’s what you need to know.

When Can You Take Out Life Insurance on Someone Else?

You can buy life insurance for someone else if all of these are true:

• You have some relationship with them. Along with parents and children, you can also buy a policy for a current or former spouse or life partner, a business partner, an employee, a sibling or a grandparent. 
• The person allows you to buy the policy. You can’t take out a life insurance policy on someone without them knowing or agreeing to it unless they are your own minor children.
• If the person died, it would be a financial hardship for you. This is called an “insurable interest.” So, for example, you may be able to buy life insurance for a former life partner if you share responsibility for young children or for a business partner whose death would impact your income.

You can’t buy life insurance for someone you don’t know, like a celebrity or athlete. And you can’t buy life insurance for someone you know, like a friend, colleague or relative, if their finances don’t affect you. 

When Could Buying Life Insurance on Someone Else Be a Good Idea?

Here are some scenarios where you might want this type of life insurance:

• You have an aging parent, and you’ll need to cover debts, burial costs or estate taxes.
• Your adult kids have kids of their own and can’t afford life insurance. You can buy life insurance for them since you would be financially responsible for their children.
• You want to keep your business afloat while you recruit a replacement for a business partner or key employee. 
• A parent or former spouse supports you financially.
• Your sibling cares for your parents, and this money would pay for a caretaker.
• Your child is at risk of a genetic condition that will make it difficult or impossible for them to get life insurance if they are diagnosed, so you want to buy a policy when they are still healthy. 

These are just a few examples — you can talk to an insurance agent or financial advisor to see if life insurance for someone else makes sense in your situation.

How Do You Get Life Insurance on Someone Else?

There are a few steps to the process you’ll want to keep in mind:

1. Get their permission — unless it is your own minor child under age 18.
2. Next, prove that their death would cause financial difficulties for you. This proof is usually easy for immediate family members. In other cases, you might need to provide documentation about the personal and financial relationship.
3. Decide how much the policy should be worth and whether you need term life insurance, which covers a set time period, or whole or universal life insurance, which is in effect as long as you keep paying the premiums.

Get Advice About Life Insurance for Others

Connect with your Farm Bureau agent or financial advisor to talk through your situation. They can help you decide if life insurance for someone else is best and can walk you through your options so you can choose a policy that meets your needs.