Why Can’t I Take Out a Life Insurance Policy on Anyone I Choose?

To take out a life insurance policy on someone, you must have what is known as an “insurable interest” in that person. This is in order to prevent life insurance from being used for nefarious purposes, such as taking out a life insurance policy on a stranger without his or her knowledge and then hoping to cash in on it, or worse yet, cause their death. Insurable interest means the person for whom you are purchasing the insurance must be a spouse or other close relative that you rely on for some support, or whose death would cause you financial or other personal harm. For the purposes of purchasing life insurance, all persons are assumed to have insurable interest in their own lives. Generally speaking, even if a person has an insurable interest to you, such as a spouse, or business partner, you cannot take out a life insurance policy on him or her without his or her knowledge.

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