Probably the most common scenario I hear is children or grandchildren considering purchasing a life insurance policy on parents or grandparents. Their thought process is, that if the cost isn’t too high, it could be a decent investment. My personal opinion is that purchasing life insurance as an investment, well….it just isn’t right. Life insurance is meant to replace a financial loss, not create wealth where it didn’t previously exist.

Another option that pops up occasionally is an ex-husband or ex-wife wanting to purchase a policy on the ex. Their thought process is to try to make a bad situation better by at least coming away from it financially better off. I suspect there may be some issues with this type of policy from a mortality standpoint.

The problem, quite often, is when these policies are proposed without wanting the insured person to know about it. The problem with that proposal is, if the proposed insured is an adult, they have to be a consenting party to the life insurance contract. For obvious (I hope) reasons, purchasing life insurance on another person without there knowledge is simply illegal.

The one exception to that would be purchasing insurance on a minor, a child. The law does allow the purchase of policies on minors as long is there is financial justification. Final expense policies would meet that threshhold. For anything more than small final expense policies, financial justification, the actual monetary loss incurred upon death, is required. Large policies on minors would take extraordinary justification. Very seldom is there a real, justifiable need.

Bottom line. If the proposed insured is an adult, they have to be a consenting party to a life insurance application. You just can’t buy life insurance on another person without their knowledge, no matter what your justification is.

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