Learn about Insurable Interest.
While shopping for life insurance, you may have come across the term ‘insurable interest’ and wondered what it is that it means or how it applies to you when purchasing a policy. Insurable interest applies directly when a person takes out a life insurance policy on another person.
If, for instance, you applied to take out a life insurance policy on your brother, you would have to prove to the life insurance provider that there is an insurable interest, or rather, a legitimate need for the life insurance policy. Basically, you have to be able to demonstrate that you benefit from your brother living and would, therefore, struggle if he were to die. The same can be said for life insurance policies that are taken out on business partners, relatives outside of one’s immediate family and even friends.
It would be rather obvious to a life insurance company that children would struggle if their parent or parents were to pass away, and so in this case they may not be required to prove insurable interest. The same can be said for a spouse. It’s only in circumstances where it isn’t directly obvious to the insurance provider why it is that you want or need to take out a life insurance policy on another person, that you must prove insurable interest.
The reason this parameter is in place is to prevent people from taking out life insurance policies on others and somehow directly or indirectly hastening the insured’s death so that they may benefit from the policy. Without insurable interest, people would take out life insurance policies on anyone and everyone.
It’s obvious that an individual needn’t provide insurable interest when they take out a life insurance policy on themselves, as they would clearly have a personal interest in being alive.
To learn more about insurable interest and what it is that you must provide in order to prove your interest, contact one of our licensed life insurance agents or the prospective life insurance provider directly.
You can talk with one of our agents by calling (855) 743-0199.