Is it possible (or legal) to take out a life insurance policy on somebody without their permission and make yourself the beneficiary? I foresee a problem in that the company might want to know the person’s medical history, but besides that, how about it? Also, could I have more than one policy on myself, and would more than one policy pay off?
You can have as many life insurance policies on yourself as you want. May or may not make sense to combine them, but there isn’t really a limit. You’re payng a permium for each $ of coverage.
You CAN take out insurance on someone else as long as you can demonstrate an INSURABLE INTEREST when you do the application (this interest may disappear in the future, but the policy will still be honored). Insurable interest in this case usually refers to a spouse, a child, or other close relative the demise of whom could put you out financially. That means business partners count.
If the insured life belongs to someone of age (18+) they will need to sign the application as well, authorizing the policy.
I am not licensed to sell any line of insurance in any state.
In order to take out an insurance policy, you must have an “insurable interest.” In other words, you have to show that you would be hurt if the thing (or person) were damaged. In the case of life insurance, employers may take out policies on their employees, because a dead worker confers a large expense on the company. (Staff must mourn, a replacement must be hired and trained, etc.) This type of arrangement is common, and most employees are not even aware of it.
Other than that, it’s pretty difficult to take out a life insurance policy on another person.
You can have multiple insurance policies on yourself. Lots of people do.
actually, semi-recently a story came out that some corporation (Cant think of the name, im sure a lot do this), had insurance on every one of its employees, without their knowledge, even after they no longer worked for the company.
As a matter of fact, it was a discussion about this certain company doing this which gave me the idea to ask here. I know where to go for answers 
. BTW, I was thinking the company was Wal-Mart, since they’re ragged on for everything else.
I believe it was Wal-Mart.
I must be missing the logic here. How does it benefit WalMart to have life insurance policies on all its employees (including former employees)? I have to assume no insurance company is going to be so foolish as to sell all these policies without having carefully calculated the acturial odds and figured out what the policies are “worth”. So presumedly WalMart is buying them at less than their value. Unless WalMart is anticipating a mass extinction amongst its workers (and maybe we should be investigating this) they will presumedly collect less money then they’ve paid in (or at least less money than they could have made by putting it into other investments).
I wondered the exact same thing. I don’t see how they could possibly benefit from this. They are big enough that they could have set up their own insurance plan and paid themselves or better yet, just invest it in a more conventional way.
Here’s a link, and another, and another.
The last requires Adobe Reader. It is interesting to note that Wal-Mart lied to the families of former employees, and when it failed to realize the tax benefit of these policies, it sued the insurance companies which issued the policies.
OK, Peter and Paul are friends, but not business partners or relatives or any such thing.
In order for Peter to insure Paul (and name himself as beneficiary), Peter has to demonstrate INSURABLE INTEREST in Paul. He can’t, so he can’t take out a policy.
But what about Paul? Can he take out a policy on himself, and name Peter as the beneficiary, or does he still need insurable interest? And if he can, would insurance regulators take in interest if the premiums were paid with checks from Peter’s account? Call it Dead Peasant Insurance in reverse.
At common law, one has an infinite insurable interest in one’s own life. So Paul can take out a policy on himself for any sum insured for which an insurer will underwrite him and for which he’s prepared to pay the premium.
Once the policy has been issued, Paul can easily transfer ownership of the policy to Peter. Peter then becomes the beneficiary under the policy and becomes responsible for paying the premiums. It does not matter that Peter has no insurable interest in Paul. As **Inigo ** said, the existence of insurable interest is an issue **only ** at the time of the policy’s inception.
Interestingly enough, in Australia (under the *Life Insurance Act * 1995), there is now no requirement for insurable interest even at policy inception.
**Little Nemo ** - there’s no difficulty in an insurer underwriting a group policy on the lives of the employees of a certain employer. Such policies are commonly arranged as part of corporate pension plans (where the employees would be the beneficiaries) or as a protection measure for the employer. The underwriters and actuaries would assess the risk based on various factors e.g. age, sex, occupations, physical locations, nature of workplace etc. They would also have to take into account the concentration risk that would arise if all of the employees worked at a single site (probably less of an issue in Wal-mart’s case). In any event, the insurer would have its own catastrophe reinsurance programme in place to deal with the possibility of single-event, single-site losses.
I understand it’s possible; what I wasn’t seeing was how it was profitable. But the articles danceswithcats linked to indicates there was a tax advantage involved.
Indeed it was.
Here’s a thread on the subject.
It is routine for corporations to have life insurance on their officers and board members, even long after they’re retired.
We discussed it here, as well.
Thanks for the links, danceswithcats.
After reading those it occurred to me that this might cause some confusion when an employee is approached by The Bossman to allow the purchase of a life insurance policy tied to the employee’s retirement plan. Typically this is a Simplified Employee Pension Plan (SEPP) which is mind-manglingly complex for this thread (for me at any rate).
Long and short of the SEPP is that an employer agrees to set aside a chunk of change for every employee, and a chunk for himself–all within the definition of the plan. Often the employee’s “fund” is a mutual fund or a Variable Universal Life policy–which for this discussion gives the employee a dual benefit of life insurance and tax-deferred income (cash that won’t be taxed until it is withdrawn, usually upon retirement age of 59 1/2). If the employee leaves before he is “vested” in the plan, like 5 years, he may keep the insurance, but the employer’s investments are forefeit and get poured back into The Boss’ retirement fund.
I may have botched a detail, but that’s the gist of it–TOTALLY legitemate and beneficial arrangement for The Boss as well as The Employee.
Then what’s to stop Australians from taking out insurance policies on the Town Drunk?
If Insurable Interest is only required at policy inception (in the US at least), then I think I’m seeing a pretty big loophole in the system here. Try to follow me:
I approach the neighborhood drunk and offer to buy him a bottle of hooch if he’ll sign on the dotted line. By doing so, he takes out a life insurance policy on himself, naming me as the beneficiary. I give the guy his bottle and never see him again.
Meanwhile, I pay the premiums on the policy. When the neighborhood drunk dies of exposure later on this winter, I have the county clerk produce a copy of the death certificate. I mail it in to the insurance company and WHAMMO… a hefty check 4-6 weeks later.
Is what I’m describing legal and/or possible under current insurance codes? If so, I can’t believe no one else has thought of it. (NOTE TO MODERATORS: I do not plan to do this, or teach or encourage anyone else to do this.)
Wouldn’t you have to produce the results of a medical examination before the ins company consents to insuring someone?
You raise a good point. However, I sometimes see these late-night commercials for term life insurance with “no medical exam necessary.” I think Colonial Penn is one such company.
So the current principals (Greedy batch they are) of WalMart got it in the ‘end’ and old man Walton got another twist to keep him spinning!