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Can I take out a life insurance policy for someone else?

You can take a life insurance policy out for someone else if there is an insurable interest. What this means is there has to be a valid financial reason why you would suffer a loss if that person died – say, they owe you a considerable sum of money.

There a handful of circumstances in which you can take out a policy on someone else, for example if you’re in a business relationship that depends on them financially, or in order to repay a joint debt.

You can take out a policy on a spouse or partner and you don’t need an insurable interest to do so. However, if you plan to be the sole owner of the policy then you’ll need to contact a financial adviser in order to arrange this. On the other hand, when it comes to ex-spouses or ex-partners, you’ll need insurable interest to do so.

With parents, you’ll only be able to take out a life insurance policy on them if there is insurable interest, for example if they pay you maintenance. Scotland is an exception to this rule though, where there is a blanket maintenance obligation until a child is 18, or in some cases 25.

One alternative to taking out life insurance for someone else is for the insured person to place a policy in trust, which would ensure entire lump sum goes to any beneficiaries rather than being swallowed up by debts or inheritance tax. Another is that they could transfer ownership of their policy to you through a Deed of Assignment, which means you’ll receive the payout upon their death.

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