You may have been wondering who you can and cannot cover when it comes to life insurance policies. When it comes to life cover policies in South Africa, it is possible to take out a policy for someone else but there are a few factors to consider.
Who can I take out life cover for?
You can take life cover out on behalf of your parents and family members. You can also take out life cover for your child, but they will need to be 18 years or older. However, other insurers do offer policies that you can have in place that can be placed under your child’s name and will be paid out once it has matured. One key factor to keep in mind when taking out life insurance for anyone than yourself is that you will have to prove insurable interest.
What is insurable interest?
Whether you are taking out a policy for a family friend, a business partner, a partner or friend, you will most likely be asked to prove insurable interest. But what does this mean?
The 'life assured' is the person who you are planning on taking out a policy on behalf of. It also means you will have to give a reason for covering the life assured. For example, you will prove that should the life assured pass away you will suffer a financial consequence or less. Your application could be denied if you are unable to prove insurable interest.
Keep in mind that even if you are able to take out a policy for a person you are not related to, they still have the choice of choosing who they will list as a beneficiary. Even if this means not adding you as a beneficiary.
What relationships can be considered as insurable interest by insurers?
Insurable interest of family members
An immediate family member such as a spouse, child, parent, sibling, grandchild or grandparent is typically approved for insurable interest. Unmarried couples may be liable for insurable interest with proof of joint assets and wills. There needs to be a bond of affection and love between the insurer and the insured.
Insurable interest of creditors
A creditor who is owed money can take out a life insurance policy on another individual up to the amount owed to them due to an insurable interest. In this instance, the creditor needs the consent of the person to be insured.
Insurable interest in business relationships
A business relationship is another situation that has grounds for insurable interest if proved to be in the best interest of the insurer that the insured stays alive. These relationships can include business partners, major stockholders or key employees of a company.
MiWayLife understands the sensitivity of taking life insurance out for someone else - no matter the relationship. They can be trusted to professionally advise, and guide, on the insurable interest of the relationship.
You will need their consent
Before taking out a policy on behalf of someone, keep in mind that you will need their consent. Before an insurer can make the policy active, they will require consent from the person you are planning on doing this for. Depending on the insurer you will need the person's I.D number, their signature, and proof of insurable interest before the policy is made active.
