It's an awkward issue on multiple levels, and there never seems to be a good time to address it. But if you care about someone, then you may find it necessary to somehow muster up the courage to ask, "Do I need to take out a life insurance policy on you?"
The fact is, the death of certain people in your life could leave you in a financial bind along with your emotional crisis. So it's wise to plan ahead and have protections in place now in case the unthinkable unexpectedly occurs. Here are ten questions to answer when considering the purchase of a life insurance policy for another person:
1. Does the person want it?
In almost every case, you will not be able to obtain a life insurance policy for someone unless he or she provides consent. A major exception is if you are buying a policy for a child under the age of 15.
2. Does the person need it?
If your loved one doesn't have any debt and no one else is financially dependent upon him or her, then life insurance may not be necessary as long as the individual has enough money in savings to cover any funeral costs.
3. Does the law allow you to purchase it?
You must have what is known as an insurable interest in order to legally acquire a life insurance policy for somebody else. That means that you would have to be impacted financially if the person were to pass away - for example, as with a spouse or an elderly parent. (Note: simply being related to someone does not necessarily constitute insurable interest.)
4. Can you buy it for someone who isn't related to you?
In some cases, an insurable interest can be shown between non-family members. Common examples include the mother or father of your child (if he or she isn't married to you) and a business partner with whom your finances intermingle.
5. How high should the death benefit be?
Life insurance policies may have to cover much more than burial expenses. Credit card or loan debt, a home mortgage, current or future taxes, and ongoing expenses required to care for another dependent (like medical costs for the spouse of an elderly parent, for example) should be taken into account when calculating how much coverage is necessary.
It helps if you come prepared with some information and options.
6. What type should you get?
In many cases, term life insurance - a policy which offers a defined death benefit for a certain time period - will be adequate. But if the person you insure is elderly and/or ill, or if you want a death benefit that never expires, then whole life insurance (also called permanent life insurance) may be a better option.
7. Will the person agree to a medical exam?
Many life insurance companies will require the insured individual to undergo a medical examination before a policy will be issued. If the other person has had a health care exam recently, the results may fulfill this requirement.
8. What won't it cover?
It's important to know the exclusions of the life insurance policy you wish to purchase. Death by suicide, during dangerous activities or illegal enterprises, war or behavior while under the influence of alcohol or drugs may be enough to deny coverage for the person named on the policy.
9. What do you need to sign up for it?
When you're ready to enroll the person, be sure that he or she has all the personal and contact information required for the life insurance policy, and that all documents are signed or initialed where necessary.
10. How do you know you're getting a good deal on it?
Treat your search for life insurance coverage the same way you would any other major purchase: by shopping around for the best quote and coverage options. IntelliQuote can provide you with rate quotes from multiple top rated insurance companies and though you'll need consent from the person you are insuring to purchase a policy, you don't need that approval just to get price quotes online. So visit the IntelliQuote website and get a start on your life insurance quote today!