Can Someone Buy a Life Insurance Policy in My Name Without … – The Motley Fool

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by Dana George | Published on Sept. 14, 2022
Image source: Getty Images.
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Buying a life insurance policy allows you to provide financially for those you care about even after you die. But what if someone else wants a policy on your life and decides to name themselves as the beneficiary? Would it be possible?
Purchasing a life insurance policy always involves the person named on the policy. Insurance companies will not allow anyone to buy insurance in your name without your agreement. The only exception to the rule is when a parent or grandparent purchases a child’s life insurance policy. In the case of grandparents, parental consent is typically required.
Insurance policies can be worth so much money, making it tempting for greedy people to seek a way to inherit. Unfortunately, attempting to cash in on someone else’s death is not new.

Stranger-owned life insurance (STOLI) is not only illegal, but it is also tricky to pull off. Back in 18th century England, some criminals took out life insurance policies on people they knew to be in poor health, naming themselves as the beneficiaries. The companies issuing the policies had no way to access the insured’s medical records or determine the risk level.
Once the insured died, insurers were on the hook for payouts to the beneficiary. It was a pretty effective scheme for a while, and some people made real money running the scam.
The scam was successful enough to make its way to the U.S., where some people saw it as a wager. They paid money upfront, hoping the person they were insuring did not have long to live.

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The practice was eventually outlawed in both the U.S. and England.
Say someone decides they want to take out a life insurance policy with you as the insured. Not only would the life insurance company require your consent, but the person buying the policy would have to prove that they have an insurable interest in your life.
Even if someone tried to get around the law, it would be tough to pull off. Here are four reasons why:
Although life insurance scams were once lucrative, there is so little chance of getting away with it today that smart criminals should know it’s not worth the effort.
Although it’s nearly impossible for anyone to get away with cashing in on a life insurance policy you knew nothing about, there are plenty of other ways dishonest people can take advantage of you.
Be mindful of who has access to your personal information, like your Social Security number. The better you protect your identity, the less chance anyone has of defrauding you.

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.
Dana has been writing about personal finance for more than 20 years, specializing in loans, debt management, investments, and business.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
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