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: Mon Dec 13, 2010 04:26 pm Post Subject:
If you live with him, it won't be a problem.
Merely living with someone does not establish insurable interest. State laws relating to insurable interest often use language such as "having a pecuniary interest in the life of" that other person. Being roommates does confer a pecuniary interest.
Posted: Tue Dec 14, 2010 05:33 am Post Subject:
Max, you are correct, but when people have been together for a long time they are rarely just "merely living with someone". For instance, if his death stops her from being able to afford to continue to live in the house, an insurable interest exists.
Posted: Tue Dec 14, 2010 09:58 am Post Subject:
if his death stops her from being able to afford to continue to live in the house
That's one way to perhaps describe a "pecuniary" interest. But if the house is merely rented or leased, and there is no mortgage involved, then insurable interest is once again clouded. Rent is not at all the same kind of obligation as a mortgage.
This is the reason that California and a number of other states have adopted "domestic partnership" legislation. Although "registered domestic partners" do no enjoy the marital privilege under federal tax law, they do under state law, and this most assuredly conveys insurable interest.
Posted: Tue Dec 14, 2010 10:18 pm Post Subject:
Isn't a "pecuniary" interest nothing more than a financial interest? If one is living with their boyfriend and the boyfriend pays the rent, there is a pecuniary interest.
Posted: Wed Dec 15, 2010 07:29 am Post Subject:
and the boyfriend pays the rent, there is a pecuniary interest.
No. It's not a legitimate financial interest. It's more llke free lodging. There has to be more substance than that.
You loan the same guy at work, week after week after week, with no repayment of any kind, $5 for gas, cigarettes, beer, whatever. That's "freeloading" and it's essentially the same as providing someone lodging for free. You have no "pecuniary interest" in the life of that person, just a small claims case for all the money you can document.
Understand, I'm not passing any judgment on a person's living arrangement or "relationship" with another person, just stating a fact. The whole concept of insurable interest is governed under and clearly articulated in state law in all states. Those statutes all include the phrase (or words to the effect) as CA Ins Code Sec 280:
"If the insured has no insurable interest, the contract is void." (Understand that VOID means as if it never existed, not merely cancelled from the time we discover the error.)
The CIC goes on to state, in Sec 283:
"A mere contingent or expectant interest in anything, not founded on an actual right to the thing, nor upon any valid contract for it, is not insurable."
That's where the "free lodging"/"freeloading" aspect comes in. No one has a "right" to living in someone else's abode in the absence of a contract (marriage is a contract). But that rental contract you have for an apartment does not give you an insurable interest in the life of your landlord either. It's merely a right to occupy in exchange for rent. It says nothing about granting a pecuniary interest in the life of the landlord.
It would be far more disastrous for a person to obtain and pay for a life policy with the expectation of receiving a death claim, only to be told -- even 20-30-40 years later -- "We're sorry, it seems that there was no insurable interest at the time the policy was applied for, and it is therefore void. Here are all of your premium payments back." Which is the only thing a person would be lawfully entitled to.
No court would ever overturn the "insurable interest" provision in law, even if 40 years of paying premiums was involved. It would completely undermine the whole nature of the business, and I'm not just talking about life insurance.
So, that's exactly why, in life insurance, insurable interest is NOT required after the policy is issued. If the boyfriend-girlfriend want to purchase life insurance on themselves and after the policies have been issued, exchange ownership of the contracts, that's perfectly acceptable under the law. It does not rise to the level of "Stranger-Originated Life Insurance" (STOLI) which is now all but completely unlawful in many states.
That's what I would recommend in this case. That the two individuals apply for insurance in their own right, and then assign ownership to each other afterward. There will not be any argument against that proposition.
Or they could get married, and resolve the issue entirely.
In the meantime, agents who write applications in situations as the OP describes, for persons who are merely living together without provable insurable interest, are risking claims against their E&O policies if a person dies and a policy is voided on the basis of an absence of insurable interest at the time of application/policy issue.
Better to be safe than sorry, and do things the right way.
Posted: Wed Dec 15, 2010 04:02 pm Post Subject:
Max, it isn't the agents job to prove anything. The agent has a responsibility to answer all questions honestly and disclose any material information It is up to the insurance company to make a decision on whether to accept a policy.
Let's deal in the real world. Can you give one example of a death benefit not being paid years after the fact because of a lack of insurable interest when everything in the application was honest and disclosed?
I understand that some companies would turn down an application with people living together, but what I'm saying is that some companies will accept the application depending upon the facts. I'm also saying that there is no way that they would then attempt to not pay a death benefit if everything is disclosed.
Posted: Wed Dec 15, 2010 07:08 pm Post Subject:
it isn't the agents job to prove anything.
Who said anything about agents proving anything.
This is not a question of paying the death benefit, it's a question of insurable interest.
The agent has a responsibility to answer all questions honestly and disclose any material information
And agents have a responsibility to protect the interests of the insurance company over the interests of the insureds. If an agent knows there is questionable insurable interest, the agent has a responsibility to discuss the matter with the insurance company BEFORE submitting an application.
Let's deal in the real world.
That's the reason I quoted from the California Insurance Code. Whether you like it or not, THAT'S THE REAL WORLD. And in the real world of insurance law, if there was no insurable interest at the time the contract is created, the contract is void. It doesn't matter when someone discovers the error.
Posted: Thu Dec 16, 2010 07:55 am Post Subject:
Max, you mentioned, "without provable insurable interest". Even when "provable insurable interest" exists, it won't be provable 20 years in the future when death occurs.
If an agent discloses are material information, they have done their job. Every situation is questionable. How does the insurance company respond when something is truly questionable and borderline? "Submit the application and we'll take a look."
Please give one example of an application disclosing all material information and being approved by an insurance company and then having the insurance company deny the claim based upon a lack of insurable interest on a policy that they approved. THAT WOULD BE REAL WORLD.
Posted: Thu Dec 16, 2010 11:30 am Post Subject:
it won't be provable 20 years in the future when death occurs.
Here's where you lack of knowledge gets in the weay of your understanding.
In life insurance, insurable interest is ONLY NEEDED at the time the policy is issued. It does not need to be proved at any other time.
Please give one example of an application disclosing all material information and being approved by an insurance company and then having the insurance company deny the claim based upon a lack of insurable interest on a policy that they approved. THAT WOULD BE REAL WORLD.
EASY!! Now you've put your foot in your mouth.
Read all the information you can find doing a Google search for "In $1.2 Million Fraud Plot, Four Women Invented A Man Then Killed Him Off".
And it's not the only one. Try a Google search for "Olga Rutterschmidt" or "Helen Golay" and tell us what you discover.
In each instance, "everything material" was disclosed on the applications. Policies were issued, claims were submitted, and in some cases, claims were paid. Only problem was . . . NO INSURABLE INTEREST. (Whether the insured actually existed or not.)
IT IS ALL ABOUT INSURABLE INTEREST, my argumentative friend. No denying the reality. Boyfriend-girlfriend may not be fraudulent (as I'm sure you are going to continue to argue), but it all hinges on INSURABLE INTEREST. Get a license, and you may learn about it. (If you have a license, then you need to start reading insurance codes and cases involving insurance law.)
Posted: Fri Dec 17, 2010 07:54 pm Post Subject:
Max, you have to be kidding me if those are your examples.
I'm talking about being honest on an application and then having the death claimed declined because of lack of insurable interest.
In the 1.2 million dollar fraud case, how was that an honest application when the persond didn't exist?
With Olga and Helen, the insurable interest in the application was fabricated. In various policies, the men were listed as relatives, business partners, or fiances, and in most of the policies, the insured's signature was forged.
Max, you were the one making the claim about worrying about a death claim 20 or 30 years into the future. If an application is honest, an insurance company won't be able to use "insurable interest" to get out of paying. These are examples of using it to get out of fraudulent applications.
I can't find a single insurance case in which the application was honest and the insurance company approved the policy and then didn't pay the claim. If insurable interest doesn't exist, the insurance company will reject the application. If insurable interest doesn't exist, but the policy gets approved due to fraud on the application, then the policy will be void from the beginning and no claim will be paid.
Your examples involve criminal acts. I'm simply saying that if a boyfriend/girlfriend live together and apply honestly, if an insurance company approves the application, a claim won't be declined based upon insurable interest.
Add your comment