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Thursday, 20 December 2012

Giving the gift of insurance


With the holidays approaching, and with people trying to find creative, thoughtful, and highly practical gifts for their loved ones, one question we have been asked a few times recently is whether it is possible to buy insurance for someone else. The quick answer to this question is: usually. Let's take a look at the types of insurance that people usually want to buy for a loved one, and discuss how that may be done.

Life insurance – the most common type of insurance that people look to buy for someone other than themselves is life insurance. Typically, the person they wish to insure is someone very close to them—a family member in most cases. That said, the “typically” is key here: very seldom will you see it done that a person buys life insurance for a very distant relative, or an acquaintance from work. The reason for this is that in order to buy life insurance for another person, you must demonstrate that you have what is called “insurable interest” in this person; that is to say, that your life would be severely impacted for the worse if they were to pass away. This impact can be both financial and emotional. With members of your immediate family, such as parents, spouses, and children, this is automatically understood. With relations that are more distant that this, however, you may need to demonstrate your “insurable interest” in the party you wish to buy insurance for.

Car insurance – it is certainly possible to buy car insurance for someone other than yourself, even for a car other than your own. What is required in such a case is that the owner of the vehicle you are insuring has consented, and that the owner benefits from the policy you are purchasing. The most common example of this is actually not a gift giving scenario, but rather, one in which a youth or young adult borrows their parent's vehicle, but covers the cost of insurance themselves. In such a case, the youth or young adult is not the owner of the vehicle, and yet is purchasing insurance for that vehicle. Another instance when this happens is one that you have probably already engaged in without even realizing it: when you rent a car, there is insurance that goes along with that. If you stop to think about it for a moment you will realize that you have paid insurance for property that is not yours.

Health insurance – you can most certainly buy health insurance for a spouse or a dependent, but beyond this, it would not be possible for you to be the one signing on a policy for someone who is either distantly related, or completely unrelated to you. There is nothing to stop you from offering such a person the funds for a health insurance policy of their own, but ultimately, they would need to be the ones signing for it.

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