There are many questions surrounding taking out life cover, especially when it is for someone else. While it is possible to take out a policy on behalf of someone else in South Africa, there are a few things to consider.
Proving Insurable Interest
Before taking out a life insurance policy, crossing your T's and dotting your I's, you will need to prove insurable interest to your insurer. But what does this mean? The key is still that you have an insurable interest and would suffer a financial loss or hardship if the life assured passed away.
For example, taking out cover for your husband, for instance, the husband is the ‘life assured.' There has to be a sound reason for covering the life assured, so you have to demonstrate that should the life assured pass away, you would suffer financial consequences or losses.
One thing to remember is that you cannot take out a policy based on being a close family member. You will need their consent, be able to prove insurable interest and have the relevant documents to cover them such as their ID.
You May Not Be The Recipient Of The Payout
Even with proving all the necessary things and having the correct documents to cover someone else, it is possible that they may not choose you as the beneficiary to receive the payout of the policy, even if you are paying for the policy on their behalf. The policyholder has the choice to choose their own beneficiaries, even if it means excluding the person who is paying for the policy.
Why Do Life Insurers Want You To Prove Insurable Interest?
If anyone could take cover out on someone else, the risk would be very high for insurers. The stories you hear about in the news where a spouse, child or sibling kills a family member to access life insurance payouts are, thankfully, very rare.
Although it’s hard to think about though, these kinds of incidents do happen, and allowing people to take out cover on another individual (like your parents) as they pleased would likely make these kind of occurrences far more common.
In taking out life insurance, you have to be protecting assets or revenue of some kind, so you can’t just take out life insurance on your great aunt or a family friend in the hope of compensation if something happens. If you could, insurance fraud would be rife.
