Life Insurance & Insurable Interest: Who Can Apply for a Policy?

Understanding Insurable Interest in Life Insurance

You cannot purchase a life insurance policy on just anyone. The law requires insurable interest—a legitimate financial or emotional stake in the insured person's life—to prevent speculative or fraudulent policies.

Who Has Insurable Interest?

Typically recognized relationships include:

• Spouses/Domestic Partners
• Parents & Children (including adoptive)
• Grandparents & Grandchildren
• Siblings (in many states)
• Business Partners / Key Employees (financial interest)
• Creditors (up to the debt amount)

Nieces, Nephews, Aunts, Uncles & Cousins

Generally, a niece or nephew does NOT have automatic insurable interest in an aunt or uncle. The same applies in reverse. Without a proven financial dependency (e.g., the aunt financially supports the niece), an insurer will deny the application.

Who Can "Propose" (Apply for) a Policy?

• The person whose life is being insured (the proposed insured) applies for themselves.
• A person with insurable interest (e.g., spouse, parent) applies on the life of the insured, with the insured's written consent.

Key Takeaway: You must demonstrate a valid financial or close familial relationship at the time of application. Consent of the insured is mandatory (except for minor children).