How Can I Get Life Insurance on My Brother?

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Life insurance companies restrict the purchase of life insurance so that you may only purchase life insurance on those you have an insurable interest in. An insurable interest is when you have a personal and economic interest in the life of the person you are insuring. You may be able to purchase life insurance on your brother, but there must be a good reason to do so.

Dependence

  • If you depend on your brother for financial support, or for certain other reasons, you may purchase life insurance on his life. For example, if you are permanently disabled and you can show the insurer that your brother takes care of you then you may be able to purchase life insurance on his life. Additionally, if you can show that you are permanently financially dependent on your brother then you may purchase life insurance on his life.

Business Partners

  • If you are in business with your brother then life insurance may be purchased on his life for business purposes. Life insurance bought, in this context, is used as part of a buy/sell agreement. When your brother dies, you will be provided with the funds to buy out his half of the business. The death benefit proceeds will fund the buy/sell agreement.

Funeral and Burial

  • You may purchase life insurance on your brother's life if you are responsible for his funeral and final expenses. A burial-type policy is purchased in this case. The size of the policy is usually negotiable and will depend on your brother's wishes.

Limitations

  • Life insurance companies attempt to protect all of their policyholders by establishing a reason for the purchase of an insurance policy. By setting the standard of insurable interest, the insurance company ensures that life insurance will be used to replace an economic loss, not make individuals wealthy at the cost of the insured individual's life. For this reason, life insurance purchased on your brother may be limited. This is especially true if you are not dependent on your brother for any reason. In the case of a buy/sell agreement, insurance is generally limited to the value of your brother's half of the business.

References

  • "Life & Health Insurance, License Exam Manual, 6th Edition"; Dearborn Financial; 2004
  • "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, et al.; 2007
  • "Life Insurance"; Kenneth Black, Jr., et al.; 1994
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