Can You Buy Life Insurance For Someone Else?

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.

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.

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.

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.