Life insurance can offer substantial financial protection to loved ones if the insured person passes away during the policy term. Naturally, insurers have several criteria regarding who can get life insurance to prevent insurance fraud.
One of the most important criteria is having an insurable interest in the person that the policy covers. The person purchasing the life insurance policy must have the potential to suffer financially from the insured’s passing to get a life insurance policy on that individual.1 Read on to learn how insurable interest works, what it means for life insurance policies, and how to prove an insurable interest.
Insurable interest is the legal and financial interest or attachment someone has for an asset or piece of property that a life insurance policy may cover.2 For example, if you own a home, you have an insurable interest in the home since damage could cause financial losses through loss of property value and income used to repair the house. Similarly, if you own a car, you could suffer financial loss if the vehicle is damaged or stolen. Therefore, you have an insurable interest in the car.
Without an insurable interest, policyholders could simply take out insurance policies on many things to profit from insurance payouts. Insurable interest helps insurers guard against insurance fraud. Therefore, insurable interest in the property is required for you to get an insurance policy on it.
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In a life insurance policy, an individual is insured instead of an asset or property. As a result, insurable interest in life insurance is the emotional, legal, and financial interest a person has in a life insurance policyholder.1
For example, if you are the primary earner in your family, your partner or dependent children may have an insurable interest in you. This is because they could experience significant financial turmoil without your income. Similarly, if you run a business, you may have an insurable interest in another business owner because the other owner’s death could impact the business’s performance. You must have an insurable interest in the insured individual to get life insurance on them.
Proving an insurable interest in the insured individual is part of the life insurance application. Individuals are always considered to have an insurable interest in themselves.1 Therefore, you can get a life insurance policy on yourself without needing to prove an insurable interest. Others can take out a life insurance policy on you as well. However, they must prove that they have an insurable interest in you. The type of proof can differ depending on the relationship but will usually involve providing legal documentation proving the relationship exists.
Here are some circumstances where insurable interest in life insurance may exist and how to prove insurable interest in each situation:2
Here are some situations where there is no insurable interest, and, therefore, you can’t get a life insurance policy for another individual:2
Life insurance can be an excellent investment, but you can’t take a policy out on anyone. You must make sure you have an insurable interest and can prove it. In general, your spouse and anyone that depends on your income may have an insurable interest in you. Business partners, estate plan beneficiaries, creditors, and even your employer could potentially have insurable interests as well.
If any of the above situations describe you or you believe you have an insurable interest in someone else for another reason, talk with an Aflac agent today. Your agent can discuss your options for protecting yourself and your loved ones with life insurance.
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1 Bankrate – Insurable Interest in Life Insurance. Updated November 8, 2021. https://www.bankrate.com/insurance/life-insurance/insurable-interest/. Accessed May 19, 2023.
2 ValuePenguin – What is Insurable Interest in Life Insurance? Updated September 7, 2022. https://www.valuepenguin.com/insurable-interest-life-insurance. Accessed May 19, 2023.
Content within this article is provided for general informational purposes and is not provided as tax, legal, health, or financial advice for any person or for any specific situation. Employers, employees, and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.
Life (A68000 Series) - In Arkansas, Idaho, Oklahoma, Oregon, Pennsylvania, Texas, & Virginia, Policies: ICC1368100, ICC1368200, ICC1368300, ICC1368400. In Delaware, Policies A68100-A68400. In New York, NY68100-NY68400. Term and Whole Life (B60000 Series) - In Arkansas, Idaho, Oklahoma, Pennsylvania, Texas, & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400. Group Whole Life (Q60000 Series) - In Arkansas, Delaware & Oregon, Policy Q60100M. In Idaho Policy Q60100MID. In Oklahoma, Policy Q60100MOK. In Texas, Policy Q60100MTX. Group Term Life (Q60000 Series) - In Delaware, Policies Q60200M. In Arkansas, Idaho, Oklahoma, Oregon & Texas, Policies ICC18Q60200M, ICC18Q60300C, ICC18Q60400C.
Aflac coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, coverage is underwritten by American Family Life Assurance Company of New York.
Tier One Coverage
Life (Final Expense Life) - In Arkansas, Delaware, Idaho, Oklahoma, Oregon, Pennsylvania, Texas, & Virginia, Policies ICC21-AFLLBL21 and ICC21-AFLRPL21; and Riders ICC21-AFLABR22, ICC21-AFLADB22, and ICC21-AFLCDR22.
Tier One coverage is underwritten by Tier One Insurance Company.
Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY or VA. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations and exclusions.
Aflac’s family of insurers include Aflac, Aflac New York, Continental American Insurance Company, and Tier One Insurance Company.
Aflac WWHQ | Tier One Insurance Company | 1932 Wynnton Road | Columbus, GA 31999.
Aflac New York | 22 Corporate Woods Boulevard, Suite 2 | Albany, NY 12211