Can You Take Out Life Insurance on a Non-Relative?
It’s not always true that life insurance is only meant for covering family members, according to the Michael Taylor Agency, serving Columbia, SC. In South Carolina, it’s possible to take out a life insurance policy on someone who isn’t related to you—but there are important rules that apply. Understanding how this works can help you determine if it is suitable for your situation.
Why Insurable Interest Matters
To take out a policy on someone else, you need what’s called an insurable interest. This means you would suffer a genuine financial loss if that person were to pass away. Insurable interest is intended to prevent people from taking out policies on strangers to profit from their death.
Examples of non-family relationships where insurable interest might exist include business partners, key employees, or individuals with whom you share significant financial obligations, such as a mortgage co-signer. In these cases, life insurance helps protect you from the financial impact if something happens to the insured person.
Consent Is Always Required
You can’t secretly take out life insurance on someone else, even if you honestly believe there’s a valid financial reason. The person you want to insure must provide written consent and typically participate in the application process, which often includes a medical examination. This protects everyone involved and ensures the policy is set up ethically.
Talking With an Expert Can Help
If you’re considering life insurance for a business partner or another important person in your financial world, it’s wise to speak with an insurance professional.
Your South Carolina agent at Michael Taylor Agency, serving Columbia, SC, is familiar with local laws and can explain what counts as insurable interest. They can guide you through the paperwork and requirements. Taking these steps ensures the policy is valid—and truly serves its purpose of protecting your financial well-being.
