Life Insurance - Can Anybody Be A Beneficiary?

A beneficiary of a life insurance policy has to be an "insurable interest.” 

Someone having an insurable interest in you means that they would experience financial loss and hardship should you die. Therefore, for someone to purchase an insurance policy on your life and be considered the beneficiary (making them beneficiary owner), they must be able to demonstrate an insurable interest. With regard to a life insurance policy, an insurable interest is based on a relationship whereby there is a common interest in another person continuing to live or a financial loss that would result at that person’s death. Therefore, in order to insure the life of an individual, an applicant for life insurance coverage must have a greater financial concern in the insured living than in them dying.

Technical Definition from

"What Is Insurable Interest? 

A person or entity has an insurable interest in an item, event or action when the damage or loss of the object would cause a financial loss or other hardships. To have an insurable interest a person or entity would take out an insurance policy protecting the person, item or event in question. The insurance policy mitigates the risk of loss should something beset the asset.

Insurable interest is an essential requirement for issuing an insurance policy which makes the entity or event legal, valid and protected against intentionally harmful acts. People not subject to financial loss do not have an insurable interest. Therefore a person or entity cannot purchase an insurance policy to cover themselves in the event of a loss.”1

State laws can differ, however, generally the following individuals would be considered having an insurable interest.

  •     Yourself
  •     Your spouse (or former spouse)
  •     Your children or grandchildren
  •     A special needs adult child
  •     An aging parent
  •     Any person under a legal obligation to you for payment of money, services, or property and whose death or illness could prevent or delay such a payment or performance.

So what about a significant other or partner? (When they are not married or even engaged, but are just living together.)

You will need to prove that the beneficiary (referring to an unmarried significant other or partner in answer to the question above) has an insurable interest. You will also need to have consent from each other.

Some examples of insurable interest for a significant other or partner can include:

  •     Both individuals being named on a lease
  •     Jointly owning a home or business
  •     Debts naming both individuals (such as a car loan)
  •     Having children

There are situations in which it may prove difficult or even impossible to buy life insurance on each other.

  • Life insurance companies won’t allow you to buy life insurance on someone you’ve just begun to date.
  • If you and your significant other or partner do not live with each other, it may be more difficult to get insurance approval.
  • If you and your significant other or partner are not financially dependent on each other, it will also be difficult to be approved.

Click web link below for another related topic regarding beneficiaries:

Life Insurance - Choosing Beneficiaries

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Note: Life Insurance information can be confusing to many people. As an "independent licensed agent" I can explain things to you in simple terms so you feel comfortable making a decision. Then I can help you choose a life insurance policy, from many choices of different insurance companies, that you feel fits your needs. Plus if you choose to work with me you will have personalized service by a local agent that can shop premium quotes for you. If you would like my assistance to discuss and/or start the process of getting you insured please call me at 941-404-5334.