There are many reasons that people purchase life insurance coverage. In most instances, though, individuals want to ensure that someone whom they love and care about will not need to struggle financially should something happen to them.
Certainly, one of the key aspects of life insurance is the named beneficiary that is listed on the policy. The beneficiary is defined as the person or entity that is named in the policy to receive the proceeds of the death benefit. A beneficiary is often a person, such as a surviving spouse or children. However, the beneficiary does not always have to be a person. A beneficiary can be a person, a trust, an estate, or a business. In any case, however, there must be an “insurable interest” in the insured.
An insurable interest exists when an insured person essentially derives a financial or other type of benefit from the continuous existence of the insured person – and conversely, then, if the insured person were to die, the beneficiary would suffer some type of financial loss.
Why Must There Be An Insurable Interest?
Prior to purchasing any type of insurance, there must be an insurable interest between the insured and the beneficiary that is named in the life insurance policy. For example, it would not make sense to purchase a homeowners insurance policy on somebody else’s house. In fact, the application would likely not even be accepted on the basis that there is no insurable interest.
A person has an insurable interest in something or somebody when loss of that item or person would cause the other to suffer some type of financial loss or other kinds of losses. For life insurance, everybody is considered to have an insurable interest in their own lives. In addition, everyone is considered to have an insurable interest in the life of their spouse and their dependents. Therefore, a person is considered to have an insurable interest in the life of the purchaser of the policy and has a reasonable expectation of a profit or other type of benefit received from the continued life of the person who is insured by the policy.
It is important to note that the insurable interest in life insurance must be at the time of application. In fact, every state requires that an insurable interest exist with the insured and the beneficiary at the time that the life insurance application is written.
Life insurance policies that are issued where there is no insurable interest are regarded to be null and void from the very beginning. This is because they are actually against public policy. In some ways, they are considered to be against public policy because they could encourage murder for profit. Without the insurable interest requirement on life insurance policies, it could possibly happen that some people may be tempted to purchase life insurance policies on other people in order to collect the death benefit by having the insured person killed.
Since a person is always considered to have an insurable interest in his or her own life, the beneficiaries of policies that an insured purchases on himself or herself do not need to have an insurable interest. This is because it is assumed that the insured would name as beneficiary a person (or persons) who love him or her and would want them to have a long and healthy life. Therefore, a person can purchase as much life insurance as he or she wishes (subject to other insurance company limits), and can name whoever he or she wishes as the policy beneficiary.
State laws have established some guidelines as to who may or may not have an insurable interest in an individual. These persons fall into three different categories. The categories include those who are related by blood or marriage, those with business relationships, and creditors.
Those who are related by blood or marriage generally have an insurable interest in their spouses, children, and dependents. These people would normally include husbands and wives, parents and children (including children who are adopted), grandparents and grandchildren, brothers and sisters, and engaged couples in most states. Those who may not fall into the insurable interest category with regard to blood or marriage would include other relatives due to marriage, nieces and nephews, cousins, uncles and aunts, and stepchildren and stepparents.
Business relationships considered to have an insurable interest would include those with a financial dependency. In this category, an insurable interest may be created in an otherwise non-insurable interest relationship. Someone who receives an economic benefit from the continued life and health of another person has an insurable interest in that other person’s life. Perhaps you’re wondering if you can qualify for life insurance with an adverse health condition such as someone needing life insurance for type 1 diabetics or diabetic insurance coverage in general. We can answer your questions and help you find the coverage you deserve.
Creditors are also allowed to take out life insurance on the lives of their debtors. However, this must involve the debtor’s consent, and the amount of life insurance can only be up to the limit of the debt. An example of a creditor who qualifies for an insurable interest relationship is a mortgage company.
In any of the above scenarios, the life insurance company has a duty to exercise care in determining if insurable interest exists and whether or not the consent of the person insured has been obtained. If the insurance companies do not exercise caution in this area, they could be sued.
As mentioned, the insurable interest must exist at the time of the life insurance application, and not necessarily at the time of the loss. An example would be a woman who purchases a life insurance policy on the life of her fiancé. If the relationship breaks up, the woman will still be able to collect benefits on the policy as long as she keeps it in force by paying the premiums.
Finding the Best Life Insurance Policy for Your Specific Needs
When you’re looking to get life insurance for anyone with insurable interest, it’s important that you find the best kind of life insurance protection for you and your loved ones. There are several different kinds of life insurance policies that you can choose from when you’re looking to get coverage. It’s important that you understand all of the different options available to you when are comparing plans.
There are two main types of life insurance, term and whole. Inside of these two plans, there are several different kinds of variations, and each of them has different advantages and disadvantages that you should be aware of to ensure that you’re getting the best plan to meet your needs. In this specific article, we are only going to talk about the two most popular basic kinds of life insurance.
The first kind is a whole life insurance plan. These plans are a permanent form of coverage, which means that as long as you continue to pay the monthly premiums, you’ll have life insurance coverage. These policies are a great option for anyone that doesn’t want to worry about losing life insurance protection or about having to reapply in the future. Because whole life plans are permanent coverage, they are going to be more expensive than other options.
The most popular option for life insurance is a term life insurance policy. These plans have expiration date attached to them, and after that date, the plans are no longer active, which means you won’t have insurance protection after that. If you want coverage, you’ll have to reapply for a new life insurance plan. Because these plans will expire, they are much more affordable than other options. If you want to get the most affordable plan available, term insurance plans are going to be one of the best choices.
When seeking the best life insurance coverage for your needs – and the financial needs of your loved ones – it is best to compare policies, insurers, and premium quotes. In doing so, it is a good idea to do so directly through a company that has access to more than just one insurance company.
When you’re ready to start comparing, our team at InsureNow 365 can help. We work with many of the top rated life insurance carriers in the market place today, and we can get you the information that you need quickly and easily – directly from your home computer, and without the need to ever meet in person with a life insurance agent. There are many options for you that we can help with, even life insurance policies for obese individuals, smokers life insurance, or life insurance coverage for veterans .When you’re ready to get the process started, get a set of quotes by using our form on this page.
If you happen to have any questions as you go through the information, or as you are running life insurance premium quotes, please feel free to contact us directly. We have experts on staff who can walk you through the step by step quote process, and who can answer any of the questions or concerns that you may have about life insurance and the protection that it can provide. We can be reached by calling 888-229-7522 toll-free.
We understand that the purchase of life insurance can be a big decision. That is why we want to ensure that you have all of the answers and information that you need as you take this important step.