Can You Buy Life Insurance For Someone Else?

Can You Buy Life Insurance For Someone Else?

26th January 2017

Life insurance can provide your family with financial protection if something were to happen to you. But what happens when the circumstances are reversed? If you rely on a family member financially, is it possible to buy an individual life policy for them that protects you?

Insurable interest

Insurable interest is a legal requirement for all insurance policies. The Economic Times defines insurable interest as 'the reasonable concern of a person to obtain insurance for any individual or property against unforeseen events such as death and losses'.

In UK law, insurable interest extends to the life of spouses and civil partners, but not between other immediate family members including:

  • Parents and children
  • Children and parents
  • Siblings
  • Cohabiting couples

Although the English and Scottish Law Commissions have tried to clear up this complex law by increasing the limits of insurable interest, it's currently not possible to buy life insurance for anybody other than your spouse or civil partner in England, Wales and Northern Ireland. Scotland is an exception, where children have an interest in the lives of their parents if they have an obligation to provide maintenance.

Deed of assignment

The way around this issue is for people to assign their policy to someone else. A deed of assignment is a legal arrangement that transfers the ownership of a life insurance policy from the existing owner to a named beneficiary. As with all transactions of this nature, both parties need to be present to ensure the document conveys what it needs to.

The law assumes that the person buying life insurance would only name a beneficiary within their policy if they wanted to protect them financially. There's usually no requirement for any beneficiary to prove insurable interest at the time of purchasing life insurance.

It's important to note that creating a deed of assignment is likely to have tax implications, so you should always seek advice from your legal or financial adviser before assigning a policy.

Life Insurance Policy Types Available

There are various options available for those looking to purchase life insurance and it's important to choose the right policy type to suit your specific circumstances:

Level term life insurance

Some people take out level term life insurance because they want to make sure they can leave their family a set amount of money. Others take it out to ensure debts are covered. If you're looking to secure financial protection for a fixed cost, level term life insurance is an option to be considered.

Learn more about level term life insurance here.

Mortgage protection insurance

As the name suggests, mortgage protection insurance is designed to cover your outstanding repayment mortgage in the event of your death. In the event of a claim your dependants receive a sum intended to pay off your mortgage in its entirety so they will not lose the family home.

Read more about mortgage protection life insurance here.

Critical illness cover

This type of insurance is often bought an integrated or independent option in addition to a level term or mortgage protection insurance policy. Critical illness cover provides a lump sum if you're diagnosed with a specified illness, usually including serious conditions such as heart attacks and cancer.

Discover more about the protection offered by critical illness cover here.

Finding the best life insurance deals

At Compare Cover, we're dedicated to helping people protect their world for less. As a specialist online comparison service, we will help you research all your life insurance options so you can find the right policy at the best possible price.

Using our price comparison service is free, fast and incredibly easy. To instantly view and compare all your quotes in one straightforward search, click here now.


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