Life insurance is a personal product that allows you to provide for your loved ones in the event of the unthinkable. But that doesn't mean you can only insure yourself. You can also buy a policy on someone else - provided you follow the legal requirements (including getting their consent). Before you buy, take a look at who you can insure and why.
Spouse
or Partner
Protecting a spouse or partner is one of the primary reasons for buying a policy on someone else. As the policy owner, you're responsible for paying the premiums and handling the paperwork issues. This means you'll get the policy statements - and the policy bills. Why would you want to act as the policy buyer for your spouse/partner? Common reasons include (but aren't limited to):
- Financial
dependence.
If your spouse or partner is financially dependent
on
you or is unable to pay for their own policy for another reason, offering to act as the buyer can give them peace of mind.
- Child support.
Divorcing spouses may (again, with the other person's consent only) take out a life insurance policy on their ex to potentially benefit their children. In this situation your child or children are named beneficiaries and will collect the policy benefits.
- Personal
preference.
Some couples
prefer to put one person in charge of all financial or
legal activities.
Even though there are plenty of reasons for taking out a policy on your spouse or partner, you can never do so independently without the other person's knowledge. If you're concerned about potential fraud allegations, work with an insurance professional. An expert will guide you through the process, making sure that you meet all legal requirements.
Older
Parents
Are you solely responsible for your parents' final expenses? If your parents don't have their own policy and you'll have to pay for funeral costs, debts, or other expenses that aren't yours, taking out a life insurance policy on them can help to offset some of your losses.
Some adult children also choose to buy, and pay for, a life insurance policy for their parents as a way to protect other family members' financial interests.
For example, if you have a sibling who is dependent on your parents, this financial burden may fall on your shoulders. The benefits from a life insurance policy can help you to assume financial responsibility over the sibling, making sure that they're protected after the death of a parent.
Business
Partners
Small-business partners often create a buy-sell agreement with one another. This contract creates guidelines for both (or all the) business partners in the event that one co-owner dies, leaves, or is unable to continue working for another reason.
What does a buy-sell agreement have to do with life insurance? If your business partner passes away, you may not have the available funds to buy their share out. As the beneficiary of your partner's policy, receiving the benefits can provide you with the ability to buy the business and keep it running.
The policy's payout can also help you to pay for operating costs during the transition time and cover your partner's/the business's debts.
Long-Term
Roommates
Buying a life insurance policy on temporary or transient roommates isn't typical. But some long-term roommates or unmarried romantic partners do choose this type of arrangement. If your living situation is permanent, you own your home with another person, or you live with a significant other who you do not plan to marry, purchasing a policy on them can help to minimize your out-of-pocket expenses.
In the event of your roommate/partner's death, the burden of paying rent, mortgage, utility bills, and other debts becomes your sole responsibility. A life insurance policy can pay for these costs and lift some of your financial burden.
Do you have a life insurance policy for yourself or someone else that you no longer need? Contact Habersham Funding, LLC, for more information on unlocking its value now.
