You can buy insurance for another person as long as you are able to take a policy and there would be some provable financial loss if they died. This is called ‘insurable interest’. For example, it might be they owe you a large sum of money which wouldn't be repaid if they died.
Some important things to consider:
- Our life insurance can only be taken on your own life or joint life so you’ll need to speak to a financial adviser to take out life insurance on someone else
- The rules are slightly different if you live in Scotland
What is insurable interest?
In its simplest terms, insurable interest is a valid financial reason to insure somebody in a way that is recognised by the law where you live. Without it you can’t set up a policy.
The Association of British Insurers describes it as “the interest that a person has in something such as a particular property or another individual, which means that the person would suffer a loss should that property or individual be harmed.”.
The most common reason is to provide some money to you if another person were to die and you’d suffer a significant financial loss. Some reasons you might want to insure someone else:
- if your parents owed you money that would be lost if they died
- repayment of a mortgage or debt you’re responsible for, together
- when you’re in a business relationship together and would financially struggle if they were to die
Can I get life insurance on my parents?
You can only take life insurance on your parents if you have proven insurable interest. In England, Wales and Northern Ireland there is no automatic reason to insure your parents, even if they provide monetary support. This means that there needs to be a potential financial loss between you, or a specific obligation (such as a maintenance order by the courts).
In Scotland there is a maintenance obligation to children which means insurable interest does exist. This lasts until 18 years old, or 25 if the child is in education or training for a trade and still being supported.
Can I get life insurance on my spouse/civil partner?
If you are married or in a civil partnership then you can insure each other, using a life insurance policy and there’s no need to prove insurable interest.
In normal circumstances, a spouse or civil-partner will take a ‘joint life’ insurance rather than ‘life of another’. This means the money will go to the surviving partner. You can apply for this directly with us if you wish.
However, if you’re interested in taking life insurance where you’re the only owner on your spouse’s life then you’ll need to get in touch with a financial adviser to set this up.
If you’re looking to insure an ex-spouse or civil partner, then insurable interest will be needed. Any policies you had before you separated can still be kept unless you cancel them.
Can I get life insurance on my brother or sister?
You can take insurance for your siblings as long as you are old enough to take a policy and there would be some financial loss if they died. For example, if you went into business or you bought a home together. There isn’t a reason to insure your sibling simply because you’re family.Are there any other options?
Yes, they can take the policy on themselves and then the policy ownership can be transferred to you with a ‘Deed of Assignment’. You’ll be the new owner and get the money when the policy pays out. This is a legal document, which a lawyer or financial adviser can give you. We’d urge you to speak to a financial adviser first as there may be tax implications.
The law assumes that as both parties are involved and present, the owner would only transfer the policy if they wanted to protect them financially so there’s no need to prove insurable interest.
In a similar way, they could place the policy into ‘trust’. The policy ownership is transferred to the trust and managed by people named as ‘trustees’ so that the money can be provided to the people that benefit (beneficiaries).
Learn more about trusts including our online trusts tool.
What types of life insurance cover can I get?
As mentioned above, joint life insurance is useful when insuring yourself and your spouse. However, it’s important that you choose the right type of life insurance for you.
There are a number of cover options available with Life Insurance.
- Level cover
- Decreasing cover
- Joint or single cover
- Critical illness cover
Find out more about your life insurance options.