Can You Buy Life Insurance For Someone Else?

Find out whether you can buy life insurance for another person and who you may be able to buy for with Savvy.

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, updated on July 10th, 2023       

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Are you interested in purchasing life insurance for a loved one or family member? It’s a common question among those who want to ensure the financial security of someone close to them, such as a parent or family member.

You can navigate the process of purchasing life insurance for someone else right here with Savvy. There are many different factors to consider, including the type of policy, the insured amount, and the health and age of the person being insured. Find out all you need to know about purchasing a policy for someone else here.

Can I buy a life insurance policy for someone else?

Yes – you can buy a life insurance policy for someone else in Australia. However, there are some things you need to consider before doing so.

Firstly, you need to have the other person's written consent and agreement to the purchase of the policy. This is because the person being insured will be required to provide personal information and may need to undergo a medical examination as part of the application process. Additionally, they’ll be required to pay the premiums or have them paid on their behalf.

You’ll also need to have an insurable interest in the person whose policy you’re purchasing. This means you’ll have to show that you’ll suffer financially if the person dies, which is usually the case with those whose debts or liabilities (such as a mortgage) will be passed onto the individual buying the policy if they die.

Additionally, you’ll need to choose the right type of policy for the person being insured. The policy should meet their specific needs and provide adequate coverage for any potential financial losses in the event of their death.

Buying life insurance for someone else may be a wise decision if done correctly and with the right intentions. It can provide financial security for loved ones or business partners in the event of an unexpected death. However, it’s important to consider all factors before making any decisions for yourself or the policyholder.

Which people may I be able to buy a life insurance policy for?

There are several different types of people you may be able to buy life insurance for. These include:

  • Spouse or partner: you may want to buy a life insurance policy for your spouse or partner to ensure you and your family’s financial security if they were to pass away.
  • Parents: if your parents are getting older but still have debts which could impact you if they pass away, it may be worth considering purchasing a life insurance policy for them.
  • Children: you may want to buy life insurance cover for your children to help ease the burden of medical or funeral costs if they were to fall ill or pass away. You don’t need your child’s consent to take out cover for them if they’re under the age of 18.
  • Business partner: if you have a business partner, you may want to buy a life insurance policy for them to ensure that your business could continue if they were to pass away.
  • Key employee: in the same way, if you have a key employee in your business, you may want to buy a life insurance policy for them to help cover your business in the event of their death.
  • Anyone else: as long as you can adequately show that you have a clear insurable interest, some insurers may enable you to buy a policy for someone who doesn’t fit into any of the above categories.

Before starting the process of buying life insurance for them, it’s important to speak with them about the prospect of a life insurance policy being purchased on their behalf. You should also get in contact with your insurer beforehand to find out more about whether you may be able to buy a policy for the person in question.

Common questions about buying life insurance for someone else

Can I buy a life insurance policy for someone else without them knowing?

You can’t buy a life insurance policy for someone else without their knowledge in Australia, as it may be considered illegal or fraudulent. In addition, the policy owner would need to undergo underwriting and provide personal information, which they may not want to share with the buyer or insurer.

Will I be able to buy a life insurance policy for another person if they can no longer consent to its purchase?

In some circumstances, it may be possible to buy a life insurance policy for someone who can no longer consent to its purchase, such as for a parent who has dementia. However, the buyer will not only need to provide evidence of their insurable interest in the life of the insured person but also have power of attorney over them. Even if you have power of attorney, however, it may be difficult to insure someone who is in a progressed state of mental decline due to the high risk of death or further illnesses.

Are there any tax implications for buying life insurance for someone else?

There may be tax implications for buying life insurance for someone else, depending on the policy type, ownership structure and premium payments. For example, the policy payout may be subject to taxation if it isn’t paid out to a dependent child or partner. It is recommended to seek advice from a tax professional if you’re unsure about what the implications may be.

What happens if I stop paying the other person’s life insurance premiums?

If the buyer stops paying the other person's life insurance premiums, the policy may lapse and the insured person would no longer have coverage. The policy owner should inform the insured person and make arrangements for them to take over the premium payments or find alternative coverage. If the insured person passes away after a policy lapse, the covered amount likely wouldn’t be paid out.

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Compare life insurance policies side-by-side

Through Savvy, you can consider a range of competitive life insurance policies from reputable insurers, whether you're after life, income protection, trauma or TPD cover. Get the ball rolling on comparing your available options today!

Disclaimer:

Savvy is partnered with Compare Club Australia Pty Ltd (AFS representative number 001279036) of Alternative Media Pty Ltd (AFS License number 486326) to provide readers with a variety of life insurance policies to compare. Savvy earns a commission from Compare Club each time a customer buys a life insurance policy via our website. We don’t arrange for products to be purchased from these brands directly, as all purchases are conducted via Compare Club.

Savvy does not compare all life insurance policies or providers currently operating in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy.

For any further information on the variety of insurers compared by Compare Club or how their business works, you can read their Financial Services Guide.