People often ask our insurance advisers if it’s possible to buy life insurance for someone else – usually a significant other, a child or a parent. The short answer is: Yes, often you can purchase a policy for someone else!
In this blog, we explain the ins and outs of buying life insurance for someone other than yourself, so that when you’re ready, you’ll be able to ask the right questions and get the best policy for your situation!
Who Can I Purchase a Life Insurance Policy for?
Most people wrongly assume that they can only buy a life insurance policy for their spouse or children. In reality, insurers often allow you to purchase life insurance for people outside of your immediate family, including:
Parents: Australia has an ageing population, and many people want to make sure that their family will be able to cope financially with the loss of an elderly parent. If you’re considering taking out a policy for your parents, it’s a good idea to do it as soon as possible as the older they are, the higher the premiums will be.
De facto partners: You don’t need to be married to take out a life insurance policy for your spouse. Whether you’re in a de facto relationship or are married the main thing you need to consider is whether you’ll take out a joint policy or individual policies. Joint policies are cheaper but only pay out once, and are only available to couples that have similar risk profiles.
Business partners and key workers: This type of insurance protects your company against the death of a key member, such as a CEO, director or partner. These funds aren’t just for management, however. You can take out a key person policy for any employee whose contribution, knowledge or work is uniquely valuable to your business.
Other people: Some insurers will allow you to take out insurance on anyone’s life if you can prove to the insurer that person’s death will cause you to suffer a personal and economic loss.
If you have a particular person you’d like to insure, talk to one of our advisors about how to find the right policy and submit a successful application.
Can I Get Life Insurance for Someone Without Their Knowledge?
To be blunt, no.
Most insurers will require the person they are going to insure to provide detailed information about their risk-factors (health, occupation, age etc.) This information is generally reffered to as the ‘personal statement’ and it needs to be signed and verified by the person that is going to be insured. In some instances, a medical examination will be required before the policy to be issued.
Why Should I Get Life Insurance for a Family Member?
Unfortunately, if your family member passes away and they do not have a financial safety net (their own life insurance policy, funeral cover or other funds), it is often left to the immediate family to:
- Pay for funeral expenses: The average cost of an Australian funeral is $6000.
- Organise legal representation: You will more than likely need to hire a solicitor to administrate their will.
- Care for dependents: If the deceased has young children or other dependents, the family will need to cover all expenses involved in their upkeep until formal arrangements are made.
All of these costs can have a devastating effect on people who are grieving, especially if they are not prepared. A life insurance policy can allow you to take care of these immediate expenses knowing that a lump sum payment will soon be released.
What Could Invalidate a Life Insurance Policy I Purchase for Someone Else?
Every policy is different, so you should carefully read the product disclosure statement (PDS) before you buy a life insurance policy for anyone else. Generally speaking, however, the same circumstances that will void a life insurance policy you’ve purchased for yourself will also void a policy you’ve bought for someone else. Examples of these exclusions include:
Fraud: If the person who is covered lies in their application documents or fails to disclose important information about their risk factors this may stop the policy being paid out.
Suicide: Most policies have an initial waiting period during which they will not pay out if the person being covered commits suicide. Make sure you ask your insurance advisor about all of the waiting periods that apply to the policy you want.
War and acts of terror: Deaths that occur due to war or acts of terror may not be eligible for a life insurance payout, particularly if they happen overseas in countries with travel warnings.
Failure to pay premiums: If you don’t pay your policy premiums on time it could lapse. Make sure that you get a policy that you can afford and, if you experience financial hardship, contact your insurer straight away about getting a temporary freeze on the policy.
Things to Consider Before Purchasing A Policy for Someone
If you’re interested in buying someone else life insurance, there are a few things you should consider before signing on the dotted line, including:
Whether they’re already insured: If possible, find out whether your loved one or key person already has a life insurance policy and who the beneficiary (the person who the policy is paid out to) is. They may already have a life insurance or TPD policy through their superannuation fund.
If your insurable interest changes: It is very important to talk to your insurance advisor about what will happen to the policy if your relationship with the person it covers changes in the future, and you no longer have a financial interest in them. This can happen if you leave a business or marriage.
How much coverage you need: This will depend on your financial relationship with the person you’re insuring. If you’re financially dependent on the person because you’re in a relationship with them or your business will have to close its doors without them, you may need a large policy. If you are insuring a child, you may only need a policy that will cover medical and funeral expenses.
Where Can I Get a Life Insurance Policy for Someone Else?
Because these policies are purchased less frequently than regular life insurance policies, it’s a good idea to speak to an insurance advisor who understands the life insurance market before you hand over any information directly to an insurer.
For free, professional advice about insuring somebody else, get in touch with a friendly advisor from Curo Financial Services today on 1300 665 356 or email email@example.com. You can also fill out our online contact form and we will contact you with the information you need.
General Advice Disclaimer
General advice warning: The advice provided is general advice only and in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.