by Guest » Tue Nov 03, 2009 02:04 pm
Me and my boyfriend have been together for 3 years. We live together. He owns the house we now live in and makes the mortgage paments on that property. I pay all the other bills such as food, utilities, internet, cable. I was wanted to get a life insuracne plan to protect me in case something happens to him, just enouph to pay off the house and other expenses. Can I purchase life insurance on him.Or does he need to purchase it and put me as the beneficiary?
Posted: Tue Dec 01, 2009 05:20 am Post Subject:
While it is generally held that insurable interest must meet certain criteria, that concept is continuously being massaged and manipulated. There are many case law examples that allow unmarrieds to hold an insurable interest.
InsTeacher 8)
Posted: Tue Dec 01, 2009 01:47 pm Post Subject:
Please don't follow the often poor or BAD advice being offered by others on this forum.
sounds to me like 'some' of us, aren't quite as stupid as ole' Max thinks we are...I (personally) don't know any state that can legally decline a co-habitating couple...
Posted: Sun May 23, 2010 05:23 pm Post Subject:
There must be an insurable interest between the owner and the insured. You can do it if the there is an insurable interest between you and him.
Alternatively, he can buy the policy and name you as the beneficiary. One always has an insurable interest in their own life.
In either case, it sounds like insurability is going to be the bigger issue.
Posted: Sat May 29, 2010 12:46 am Post Subject: Life Insurance
If I have Life Insurance on my boyfriend, I'm the owner and Beneficiary. And he's married, in the case that he passes away, will I be able to collect..
Posted: Sat May 29, 2010 09:47 am Post Subject:
Merely being boyfriend-girlfriend may not necessarily be sufficient to constitute an insurable interest. There are three elements required: potential for financial loss, no profit or gain when a claim is paid, and legitimate financial connection. Lacking any one of these three elements, there is no insurable interest.
If there is not sufficient insurable interest at the time the policy is issued, the insurer can legally consider the policy VOID from the beginning, and this is one of the three or four escapes from the normal two-year INCONTESTABILITY PROVISION in the contract. Other escapes may include impersonation or fraud (under certain circumstances, such as obtaining insurance on an already deceased person).
Additionally, a small number of states still have archaic laws on their books that limit beneficiaries to persons with an insurable interest in the insured. So while an insurance company may overlook (deliberately or inadvertently) insurable interest between the owner and insured and issue a policy, state law in those places can still prevent proceeds from reaching a named beneficiary without insurable interest.
Posted: Sat May 29, 2010 10:33 am Post Subject:
If there isn't insurable interest, the insurance company will decline the application. The only way that they are going to accept an application without insurable interest is if fraud is involved. An insurance company can't approve a policy knowing that they won't pay the claim.
Max, please give us one case example of an insurance company not paying a death claim because no insurable interest existed at the time of the application and everything in the application was honest.
One reason for incontestible periods is it is awfully hard for a dead person to have to prove something from many years ago. How is a dead person supposed to be involved with proving that there was insurable interest 15 years prior?
Posted: Sat May 29, 2010 12:29 pm Post Subject:
If there isn't insurable interest, the insurance company will decline the application. The only way that they are going to accept an application without insurable interest is if fraud is involved. An insurance company can't approve a policy knowing that they won't pay the claim.
Well, I don't think you can make a blanket statement such as that. Remember, to prove FRAUD one has to prove INTENT to gain an advantage. Who's to say that an agent misunderstands a particular situation, and the company relies on the information in the application and issues a policy in error. That's not fraud, just a mistake. If a client tells me he and the woman he's sitting next to are married, I don't ask for a marriage certificate to prove it. (I never asked to see a person's driver license to prove their age prior to passage of the USAPATRIOT Act, either.) [[There's also a guy here who refers people to a Lloyd's syndicate that writes one-year term for persons without the cooperation of the insured in the application, which seems to violate state insurance laws.]]
Here's a hypothetical: What if the minister who married them was not legally qualified to perform the ceremony? California does not recognize "common law" marriage as some states do (so now we have "registered domestic partners" which creates an insurable interest, but is not good enough to satisfy federal law for things like Social Security entitlements or non-taxable estate transfers). Does that make them legally married because they had a county-issued license at the time or not?
An insurance company can't approve a policy knowing that they won't pay the claim.
They do this all the time. But it's specifically described in the contract. It's the exception found in the suicide clause. Die by suicide in the first two years, and no death claim will be paid. They tell you that, and they approve the policy.
Insurance companies are free to make an honest mistake and issue a policy when no insurable interest exists. The fact that it is discovered later is what gives them the legal right to VOID the contract. It's not significantly different in concept than being able to adjust the death benefit many years down the road when the misstated age of the insured is discovered -- another of the things that escapes incontestability.
because no insurable interest existed at the time of the application and everything in the application was honest.
This is a non sequiter. If everything in the application is accurate, I cannot think of a situation in which there would not be insurable interest -- unless it simply does not exist. I've never seen a life application that asks the question, "Does insurable interest exist between the owner and the insured?" but when the third-party owner signs the application, he/she is making the statement that there is insurable interest. They might sincerely believe it to be true, but it could still be incorrect.
It is the responsibility of the owner to demonstrate to underwriting that insurable interest exists when it is not readily apparent (as we do when it comes to business partners or corporate owners of key person policies or COLI). It's up to underwriting to question the application. But underwriters are human, and they can make a mistake, even by overlooking the obvious.
In my "What if . . ." example, we would all probably expect the insurer to pay the death claim, since the business of living together for many years would most likely establish the necessary "legitimate financial connection" that was intended to exist. Still, doing so could create one of those "estoppel" events that could force the company to pay all death claims where there was no insurable interest at the time of application/policy issue. Fundamentally, this would be in conflict with the law of most states. It's not the kind of position in which most insurance companies would enjoy finding themselves.
Really, though, I think this is all a lot of hair-splitting, because insurable interest disputes following a death are very infrequent. As you point out, and you get no argument from me at all, if the underwriter clearly fails to see insurable interest, the application is supposed to be declined.
The initial intent of this thread simply relates to insurable interest between boyfriend-girlfriend. Unless there are extenuating circumstances (children is a good one, as is joint debt--a truly insurable interest), there is not likely to be insurable interest in most such situations.
The simple solution for two persons desperate/desiring to obtain life insurance in such an instance is for each to apply as owner-insured of their own coverage, complete underwriting, accept the policy upon issue, and then change/exchange ownership. The company will not stop that from happening.
How is a dead person supposed to be involved with proving that there was insurable interest 15 years prior?
Obviously the dead guy cannot be involved. But I'm assuming you meant the dead guy was not the owner, either. It's the owner who must demonstrate insurable interest. So again, this is a non sequiter.
If the insurance company challenges a death claim on grounds that there was no insurable interest at the time of application/policy issue, it will ultimately have to prove it to prevail. But the original owner or the ultimate beneficiary will have to sue to get them to do so. Don't need the dead guy for that, unless he was the original owner.
One reason for incontestible periods is it is awfully hard for a dead person to have to prove something from many years ago.
You're 100% right. The incontestable period (usually two years) is a protection for the policyowner that means information in the application generally cannot be used after that certain point in time to avoid a death claim. But even so, it's the insurance company that must "prove" its point, and the owner who must defend his answers. In certain circumstances, even fraud may not void a life policy once the policy becomes incontestable. Impersonation (such as using an impostor to provide blood and urine for underwriting) and lack of insurable interest have been held to NOT be incontestable, because they are material to the risk being insured.
Normally, as far as incontestability goes, we're concerned with material misrepresentations about health status or the other questions answered in the application (such as, "Have you ever been convicted of a felony?" that some companies ask). The insurer does not have unlimited time to investigate them, and if they do not within those two years, then the policy stands as issued.
Unfortunately, like a misrepresentation of one's age or gender (neither of which is truly material to the risk, but does directly affect the cost of insurance), misrepresentation or the absence of insurable interest escapes that protection. Because, like it or not, if it's a problem, it's a problem. The insurance codes of most, if not all, states make it a problem -- not the insurer -- by requiring that insurable interest exist at the time a policy is issued, if not sooner. It's those same codes that describe insurance as void when it does not exist.
Posted: Sat May 29, 2010 06:22 pm Post Subject:
As a follow-on to all this, there is the recent (2008) matter of the two elderly women (Olga Rutterschmidt, 75, and Helen Golay, 77) here in the Los Angeles (CA) area who obtained life insurance on at least two homeless men, and were later arrested and convicted for having conspired to murder the men in seemingly unrelated auto accidents.
Who knows what was actually stated in the applications as the basis for insurable interest, but apparently everything must have "appeared" to be honest to the insurance companies. The real problem is that even though the women (1) intended to kill the men to collect the insurance proceeds, more importantly (2) there was no insurable interest that existed between them. The fact that the women provided apartments for the previously homeless men for up to two years does not, by itself, create an insurable interest. None of this was known prior to paying the death claims -- had it been known, you can be sure that the insurers would not have paid the claims and voided the policies, returning the premiums as required. Has nothing to do with honesty in the application, and everything to do with insurable interest. That California state law bars a beneficiary from collecting death proceeds as a result of their criminal involvement also helps.
Unfortunately, the women were reported to have received some $2.8 million in life insurance proceeds before their crimes were uncovered. The insurers can lawfully attempt to recover the money specifically as a result of (1) the criminal acts on the part of the beneficiaries, and (2) the now proven absence of insurable interest that necessarily voids the policies under California law. There is no defense against either.
That any money remains available to recover is an entirely different matter. It's all probably long gone.
Scott Peterson had a genuine insurable interest in his wife, Laci, even though he apparently also had the genuine intent to kill her to collect her life insurance proceeds -- and the jury convicted him of her murder. That the two of them "applied" for life insurance at the same time not long before the crime occurred had no bearing on the outcome of the matter -- it was simply a ruse to make it all appear "innocent".
But Laci's policy was not invalidated because of Scott's bad/fraudulent intent since insurable interest actually existed and because California's insurance code does not address fraud as something which voids a life policy (as it does when addressing applications for health insurance and property & casualty policies).
Scott's ability to collect the $250,000 proceeds as beneficiary was lawfully prevented by his criminal act. After his conviction, the parents of Laci Peterson actually brought a suit in civil court to block Scott from his attempt to collect as the beneficiary. His murder conviction made it a simple matter for the court to dispose of, and the money was ordered payable to Laci's estate. Nevertheless, Scott's attorneys appealed the decision. According to the San Francisco Chronicle
In seeking the insurance benefits, Scott Peterson's lawyers said that because his case is on appeal, he is not covered by a state law barring a beneficiary who deliberately kills the policyholder from collecting the insurance proceeds. The appeals court disagreed, saying the conviction was admissible as evidence of the murder and that Peterson's lawyers had presented no evidence that he did not kill his wife.
If his conviction is overturned at some point in the future, he might have a renewed claim against the money. But, once it's gone, it may be impossible to recover. Until then, Scott sits penniless in his prison cell.
I'm sure there are numerous similar examples in other states that could also be cited, just as there are some states' insurance codes that do mention fraud as a reason to lift the limit on incontestability of life insurance. While "honesty" (aka: utmost good faith) is assumed in an application for insurance, it is not a requirement in order for insurable interest to exist.
Posted: Sat May 29, 2010 09:15 pm Post Subject:
Yes, a policy can get approved without fraud when the insurer makes a mistake. I've never seen an insurer be able to avoid paying a death claim on a policy older than 2 years by claiming that they made a mistake.
The Lloyd's policy doesn't have anything to do with insurable interest. Insurable interest must still exist with that policy. Keep in mind that because Lloyd's is not an admitted insurer in the state, they can do things that other insurers can't do. On the flip side of the coin, they can't do what admitted insurers will do.
An insurance company discovering a mistake that they make is very different than discovering false information like a misstatement of age.
Posted: Sat May 29, 2010 09:20 pm Post Subject:
As for your old ladies, they can't collect the death benefit. However, if the application wasn't fraudulent, and the insurance company screwed up by issuing it, I can't imagine any court allowing a company to benefit from their own mistake.
Max, I think that your problem is that you have spent your career in insurance in the background and becoming such an expert that you don't have the real world expertise that you would have if you had sold thousands of policies and paid dozens of death claims.
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