Can You Take Out a Life Insurance Policy on Someone Without them Knowing? – Frugal Confessions

Can You Take Out a Life Insurance Policy on Someone Without them Knowing?

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I had an interesting question pop up the other day about whether or not you can take out a life insurance policy on someone you do not even know. Presumably, this would mean that if they died, you would get a cash payment of some sort…without them ever even knowing you had the policy in the first place (I doubt you would take the time to flag someone down, whom you don’t know personally, and tell them about this great new life insurance policy you have).

Could you imagine, having free reign to take out life insurance policies? You could take one out on movie stars like Meryl Streep and Clint Eastwood. You could take one out on the President, or someone in a precarious situation like a football player, a soldier, or a police officer. And since they don’t ever have to know, then you could save on all of those awkward conversations…right?

To be honest, I didn’t know the answer to either of these questions until I researched further (though my gut told me that it would be ridiculous to be able to take a policy out on a total stranger). Here is what I found:

Taking Out Life Insurance Policies on Strangers

It turns out that you cannot take a life insurance policy out on someone you do not know (thank goodness! Can you image how many policies would be out on stars like Morgan Freeman and Tom Cruise?). The regulation of insurance is left to each state so the laws vary; however, generally speaking, you must have an “insurable interest” in the person you will be taking a life insurance policy out for. This is easy to prove for people that are close family, such as your spouse, child, etc. But showing that you have insurable interest to a complete stranger or distant relative, which means that it is in your best interest for the person to be alive financially or otherwise, is much more difficult to do.

Taking Out Life Insurance Policies without the Insured Person Knowing

This leads to the second question. Can you take out a life insurance policy without the insured person knowing? We know that you cannot take policies out on strangers, but what about if you wanted to take a policy out on a relative?

In many cases, insurance companies require medical exams for the person who is to be insured. But this is not always the case. The real way that the person will find out you are taking an insurance policy out on them is during the application. If the insured applicant’s name is different from the policyholder’s name, then the signature of the insured person is required.

Cases where applicants have forged signatures, unfortunately, do occur. Just google the title to this article and read the comment sections where numerous people are either concerned that someone may have taken a policy out on them, or know that someone has and forged their signature. In this case it is on the company to conduct due diligence with each application, as well as your trust in the people around you that they would not take out a policy on you without your knowledge to stop this sort of thing from happening.

9 comments… add one

  • sarah

    I belive my parents. have. a insurance policy out on me but I don’t want them to because I don’t think it’s right, is there anything I can do about it?

    • Amanda

      Hmmm…I’m assuming you’re under 18? I’m not sure if there is anything you can do about it. You might want to call a life insurance rep and ask them the question. Please let us know if you do!

      • L

        Why would they care. It is usually only enough to make sure that final arrangements are made so they are not taken out of pocket. If your are dead, why do you care of someone that is alive can benefit from that. My ex husband did not believe in it and left nothing to his two children. Nothing to his mother who had to pay for all his final arrangements out of her pocket. I think it is just selfish to do that to your relatives. That is what life insurance is all about.

        • This isn’t about the family getting the money from an insurance policy, it’s about a stranger having an insurance policy on someone who is NOT family and is taking advantage and they are getting the money for funeral costs and the children, NOT the family who NEED IT!

  • Tabitha

    Can your wife take life insurance out on you, without you knowing?

    • Amanda

      From what I’ve researched, yes, it is legal to do that.

  • Mrs.Lasa

    I just recently learned that my dad ex girlfriend stepson has a insurance policy on my little brother and he did not know nothing about what should I do

  • mia

    Two years ago I was diagnosed with a rare and incurable terminal illness. It has been brought to my attention via Washington State Courts, that there was an insurance policy taken out on me by my father after learning of my condition. I called the insurance company and they said that yes there was a policy but they can not give me any information on the policy but my dad is the beneficiary.

  • kg

    I have an 88 y old parent with alzheimers. Two siblings monopolized her financial affairs. I believe they may have had her take out a policy and list them as beneficiaries either before or after the disease. Either way, the asset, if exists, should have been disclosed because she had to go on welfare. They had her sign a quit claim deed on her home and do a reverse mtg without her awareness so not a stretch to imagine this. Any way to find out if a policy exists? thanks

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