Can You Buy A Life Insurance Policy On Anyone You Want?

In order to buy a life insurance policy on someone you must have what is known in the industry as an “insurable interest”. But what does that mean?

Let’s say you and another person are business partners. If the other person in your 2-person business died, you would lose 50% of your labor force & business smarts. That would be an insurable interest, and a reason to buy a life insurance policy on your business partner.

Or say three brothers, a mom, and dad own a family farm together. One brother knows that the other two brothers hate farming & are going to want him to buy them out when their mom & dad die.

So the brother who wants the farm would take out a life insurance policy on each of his parents, for an amount based on what the fair market value of the farm would be at the time of his parents’ death. He would be sure to include any taxes that he may have to pay, depending on how his parent’s will or trust was set up, as well as some extra money to cover the cost of running the farm for the next couple of years.

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