Can you get life insurance on your uncle?
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Asked March 8, 2011
"Insurable interest" is the term that insurance companies like to hear. Before they will let you take out an insurance policy on anyone other than an immediate relative they will want to see that there is an insurable interest in the policy, that is, that you have something to lose if the insured person should pass away. Once an insurable interest can be shown, the next thing they will need is consent of the insured person, verifying that you have a legal right to purchase and maintain such a policy.
Informed consent means that the insured person is aware of the policy, agrees to the amount and named beneficiaries, and is in favor of the policy being written. This prevents just anyone from taking out million dollar insurance policies on famous people and then cashing in when that person, a complete stranger, dies. Informed consent establishes a relationship and agreement between you and the person named in the policy.
Generic savings accounts may be suitable for uninformed or non-consenting "homemade policies." Set up a savings account and keep it in reserve or set it up as a trust fund that is regularly paid into, and which will become payable at the time of the named person's demise. The problem with a savings account as you lose the tax deferment popular with whole life plans, but you also gain a versatility that can't be matched by any true type of insurance policy.
Answered March 8, 2011 by Anonymous