Purchasing life insurance for a sibling
Q. Can I buy a small life insurance policy on my sibling? He doesn’t have the resources for a proper funeral or burial if the need arises.
A. We’re glad to see you’re planning ahead.
Life insurance companies will underwrite a life insurance application when there is an “insurable interest,” said Ed Gaelick, a Chartered Life Underwriter and Chartered Financial Consultant with PSI Consultants in Glen Rock.
“In simple terms, this means the beneficiary will have a financial loss in the event of the death of the insured,” Gaelick said. “Purchasing a life insurance policy on a sibling to cover final expenses is, in my opinion, a valid reason and I’d also go so far as say there is an insurable interest.”
Gaekick said he also believes entering into a contract of insurance for this purpose — final expenses — complies with the obligation to act with utmost good faith towards the company offering the insurance.
While an underwriter will ultimately make the decision based on all the facts surrounding the application, Gaelick said he doesn’t anticipate a problem for you.
He also notes that proceeds will be paid to the named beneficiary and what that person does with the money — using it for final expenses or something else — is not in the insurance company’s control.
Karin Price Mueller writes the Bamboozled column for The Star-Ledger and she’s the founder of NJMoneyHelp.com. Click here to sign up for the NJMoneyHelp.com weekly e-newsletter. Like NJMoneyHelp.com on Facebook and follow it on Twitter.