Can I buy life insurance on my brother (or sister)?
Do you have a brother or a sister that you love dearly but wish they would “grow up” a little?
Or one that…
Would take his or her responsibilities a little bit more seriously and not leave you constantly worrying about what would happen if he or she passed away prematurely?
We’ll if so…
You’re going to want to keep reading because in this article we’re going to answer many of the questions that we get from folks who are looking to purchase a life insurance policy on a sibling of theirs.
Questions that will be addressed will include:
- 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 ensure I 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. This means that if you want to buy life insurance policy on your brother or sister, there is a reasonable chance that you may be able to do so.
Just because you have a brother or sister doesn’t mean that you’re going to “automatically” be able to purchase a life insurance policy on him or here. You’re first going to need to demonstrate that you have an “insurable interest” in your brother or sister’s life before you are able to “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 where one person would suffer from a “financial loss” if another person were to pass away prematurely.
Now in situations where…
An individual may be financially dependent on another person, such as in the case of a marriage, establishing an “insurable interest” on one’s spouse really isn’t an issue.
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.
That said however…
One an adult is looking to purchase a life insurance policy on their brother or sister, insurance companies will generally be more interested in knowing why?
When it comes to buying an insurance policy, regardless of what kind of insurance you’re looking for, the purpose of having a policy is not to profit from a situation. Instead, the purpose is to avoid financial loss.
If you owned a 2002 Toyota Camry and it was stolen from you today. Your auto insurance company would not pay you the full amount that you originally paid for your 2002 Toyota Camry back in 2002.
Instead, they would presumably pay you a “fair market” value for a 2002 Toyota Camry today! This is because that is the amount of “financial loss” you suffered from.
Which brings us back…
To the dilemma we have why trying to determine how much life insurance one sibling may be able to purchase on another one.
For example, if you are financially dependent on income (or financial assistance) you receive from your brother or sister, you may be able to qualify for a significant amount of life insurance on him or here.
If you are financially independent and don’t require any financial assistance from your brother or sister, you may find it challenging to qualify for much insurance or any at all.
But there’s a catch!
You see if you choose to apply with a life insurance agent who is familiar with how insurance companies determine whether or not someone has an “insurable interest” on another.
Often a case can be made that someone may have a significant “insurable interest” on another even when they aren’t financially dependent upon them.
Let’s assume that you are not financially dependent upon your brother or sister at all. You’re significantly wealthier than your brother or sister. So much so, that is clear that should your brother or sister pass away premature, caring for their 3 adolescent children is undoubtedly going to fall on you.
As a result…
While you may not be financially dependent on your brother or sister, were they to pass away you would certainly suffer financially because you would then need to care for their children.
Which would mean that you definitely have an “insurable interest” on them and would “technically” be able to purchase a life insurance policy on them provided that they offered your “consent”.
What does it mean to have one’s “consent,” and how is it determined?
OK, not that we established that an individual has an “insurable interest” on another, we now need to demonstrate that the individual that we want to purchase a life insurance policy on is “OK” with you doing so.
This is what…
Insurance companies will refer to as “consent”. Now establishing consent can take on many forms depending on the “type” of insurance an individual is applying for and the company they are choosing to apply with.
In most cases…
When an individual wants to purchase a traditional life insurance policy on their brother or sister, a medical exam will be required during the application process. Because of this, “consent” will usually be obtained during the exam both implicitly by taking the exam and explicitly by having the proposed insured sign the application.
Where things can become…
In cases like these, what you’re going to find is that each life insurance company is going to have their own rules and regulations about establishing “consent” an 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 inforce, you would then be able to change who the payor would be later on (in many cases).
Factors like these…
Will often be used to determine “which” life insurance company is going to be the best for you. After all, it’s not all that 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 try to keep the process as simple as possible for the proposed insured without sacrificing the payor/beneficiary’s rights throughout the entire 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?
Up until now, we’ve pretty much focused on whether or not a sibling can purchase a life insurance policy on their brother or sister.
What we haven’t spent much time talking about 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 so that their best interests are protected?
Assuming that you do have an insurable interest on 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 for the sole purpose of avoiding such a loss, you really ought to make sure that this new life insurance policy that your purchasing will do precisely that!
Whenever possible, you’re going to want to make sure that you become the owner of the life insurance policy and/or you 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…
That 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, just give us a call so that we can help you find exactly what you’re looking for!