Despite all the differences we as Americans face in today’s society, one irrefutable truth is that, at the end of the day, we all want what’s best for our own family and loved ones. Sometimes, this desire to do what’s best means that we have to assume the responsibility of another family member by ensuring they have the financial protection in place that only a life insurance policy can provide.

Especially if…
The family member in question has a significant insurance need but is either unwilling or unable to purchase the amount of life insurance it would take to guarantee that you and your loved ones would be financially protected if they were to die prematurely.

This is often the situation when one sibling finds themselves in a situation where they would certainly suffer financially if their brother or sister were to pass away. This is why we wanted to take a moment and discuss the most common questions we ask individuals looking to purchase a life insurance policy on a sibling so that you, the reader, will have a better idea about what options may be available to you.

Questions such as:

• Can a sibling buy a life insurance policy on another sibling?
• What is “insurable interest”? And how is it established?
• What does it mean to have one’s “consent,” and how is it determined?
• What “kinds” of life insurance policies can a sibling purchase on another sibling?
• What steps can I take to purchase the “right” life insurance policy for my needs?

So, without further ado, let’s dive right in!

Can a sibling buy a life insurance policy on another sibling?

Yes, in some situations, it may be possible for one sibling to purchase a life insurance policy on another sibling. So, if you’re looking to buy a life insurance policy for your brother or sister, there is a reasonable chance that you can do so.

But…

Just because you have a brother or sister doesn’t mean that you’ll “automatically” be able to purchase a life insurance policy on him or her. You’ll first need to demonstrate that you have an “insurable interest” in your brother or sister’s life before you can “justify” buying a life insurance policy on them.

What is “insurable interest”? And how is it established?

Insurable interest is a term used to describe a situation in which the person looking to purchase a life insurance policy would stand to suffer financially if the insured person were to die.

In the case of siblings, there is generally considered to be an insurable interest because the loss of a sibling could affect the financial well-being of the surviving siblings, for example, if the siblings co-owned a business together or if the deceased sibling was providing financial support to the surviving siblings.

To buy a life insurance policy…

The first thing that needs to happen is that the sibling purchasing the policy would need to undergo the usual underwriting process. This typically involves answering questions about the health and lifestyle of the insured sibling and possibly completing a medical exam. The insurance company will use this information to determine the risk of insuring the sibling and set the policy premium.

It is important to note that for a life insurance policy to be valid, the person buying the policy must have an insurable interest in the insured person. If there is no insurable interest, the policy may be considered void. For example, a stranger cannot buy a life insurance policy on someone else without an insurable interest.

Now, in situations where…

An individual may be financially dependent on another person, such as in the case of a husband or wife (or ex-husband or ex-wife); establishing an “insurable interest” isn’t all that difficult (in most cases). This is why, in cases like these, most of the best life insurance companies aren’t going to spend too much time determining whether an “insurable interest” exists, particularly if the applicant applying for insurance isn’t applying for an outrageous amount.

However…

In cases where one sibling is looking to purchase a life insurance policy on another sibling, most life insurance companies will want to know “why”? Particularly if there is an obvious financial connection between the two or if one is looking to purchase a large life insurance policy on the other.

For this reason, it’s important to choose to work with a life insurance agent who is familiar with the idea of “insurable interest” because the truth is that siblings will often incur a significant financial loss upon the death of a brother or sister, even if they aren’t dependent upon them financially.

For example…

Surviving siblings may be held responsible for covering any burial costs for the family if the deceased doesn’t have any savings upon their death. But this is just one of the surviving siblings’ costs.

What if the sibling in question has…

• Dependent children, that will now need to be cared for?
• Are you currently a caregiver for elderly parents who will need to be cared for?

Or is it an important component of a family business that needs to be replaced by someone outside of the family?

“Who knows?”

The truth is there could be thousands of reasons why one sibling needs and/or wants to purchase a life insurance policy on one of their siblings; the key will be to demonstrate that this need is justified. This is something that a highly qualified agent here at IBUSA will be able to do for you.

But, just because…

You can prove a “need” doesn’t mean you’ll be able to purchase a life insurance policy automatically. The next step after you’ve proven you have an INSURABLE INTEREST will be to prove that you have the consent of your brother or sister as well.

What does it mean to have one’s “consent,” and how is it determined?

In the context of buying a life insurance policy, having the “consent” of the person being insured refers to the person’s agreement to be the subject of the policy. This is important because the person being insured is the one whose life is being insured, and the insurance company will need to rely on information about their health and lifestyle to determine the risk of insuring them and to set the premium for the policy.

For a life insurance policy to be valid…

The person being insured must typically consent to the policy. This can be done by completing an application for the policy and answering questions about their health and lifestyle. The person being insured may also be required to undergo a medical exam as part of the underwriting process.

There are some cases where a person may not be able to give their consent to a life insurance policy, such as if they are incapacitated or otherwise unable to make decisions for themselves. In these cases, the insurance company may require additional documentation or follow specific procedures to determine that the policy is being purchased for the benefit of the insured person.

Again, it is important to note that for a life insurance policy to be valid, the person buying the policy must also have an “insurable interest” in the insured person. This means that the person purchasing the policy would stand to suffer financially if the insured person were to die. In the case of siblings, there is generally considered to be an insurable interest because the loss of a sibling could affect the financial well-being of the surviving siblings.

Where things can become…

A bit more “tricky” is when an individual is applying for a no-medical exam life insurance policy or a final expense insurance policy where a medical exam will not likely be necessary. In cases like these, what you’re going to find is that each life insurance company is going to have its own rules and regulations about establishing “consent” and may require the proposed insured to either:

• Provide their consent over the phone on a recorded line.
• Become the owner of the policy (at least in the beginning).

Or maybe provide original payment for the policy to get it started. Once in force, you could change who the payor would be later (in many cases).

Factors like these…

Will often be used to determine “which” life insurance company will be the best for you. After all, it’s not uncommon for a sibling to be willing to allow his or her brother or sister to purchase a life insurance policy on them. However, this “willingness” can often diminish if the process becomes too “burdensome” for them.

This is why…

It’s often essential to keep the process as simple as possible for the proposed insured without sacrificing the payor/beneficiary’s rights throughout the process. This brings us to the last topic that we wanted to take a moment and discuss, which is…

What steps should one follow to ensure they find the “best” life insurance policy for their needs?

Until now, we’ve focused on whether a sibling can purchase a life insurance policy on their brother or sister. What we haven’t spent much time discussing is once it’s been determined that one individual can buy a life insurance policy on a sibling, what should the “payor” of this new policy watch out for to protect their best interests?

After all…

Assuming that you do have an insurable interest in your sibling, what that means is that if they were to pass away prematurely, you would suffer from some financial loss. This means that if you’re going to go through all the trouble in securing a life insurance policy on them to avoid such a loss, you should make sure that this new life insurance policy you purchase will do precisely that!

So,

Whenever possible, you’re going to want to make sure that you become the owner of the life insurance policy and/or become an irrevocable beneficiary of the policy that you are paying for so that you can be sure that nothing about the policy can change without your permission.

The good news is…

We here at IBUSA have plenty of experience helping folks purchase life insurance policies and understand many of the unique challenges buying life insurance on someone else can pose. So, when you’re ready, call us so we can help you find exactly what you’re looking for!