January 24, 2008
Q: Can someone get a life insurance policy on me without my knowledge?
A: Anything under the sun is possible. In order to get a life insurance policy issued, a person should have:
1. An insurable interest in the insured (you’re financially impacted if someone dies)
2. A need for the insurance $$ amount requested (no $5 million polices on your kids, unless she’s Miley Cyrus)
3. Access to personal information IE DOB, SSN, address, medical history
4. Signature of the insured (if insured is an adult)
5. Cooperation from insured if insurer requires paramedic exam (blood, urine, saliva, med history) or a physical exam. The people performing the exams are required to check IDs.
In order to collect on the policy, the person would need:
1. Cooperation from family or the executor of the estate to get death certificates.
2. Be outside the contestability period of the policy (usually two years from policy issue date) to avoid the scrutiny of the insurance company.
In the US, there are around 1,500 - 2,000 life insurance companies and they all do business in a similar manner with small differences in underwriting. None of them would make a profit by paying death claims on fraudulently obtained policies; so safeguards are put in place to guard against deception.
Without a paramedic exam or physical, there is a limit on how much insurance you can purchase. The industry limit seems to be around $250,000. So purchasing a $1M life insurance policy without the insured’s knowledge would be a challenge requiring a good amount of deception and fraud at policy issue. There is one currently incarcerated agent who got busted filing fraudulent death claims.
This limits the size and type of policy someone could purchase. Small policies (say less than $100,000 for a young person, $25,000 for an older person) get less scrutiny. Group policies require only a few questions, but again limit the death benefit that can be purchased (usually only spouses can be named to purchase 50% of employee’s death benefit).
So, my conclusion; unless you’re the target of a well thought out deception, you’re probably just paranoid or watch too much TV.
Editors note: Aaron at Council Financial pointed out to me there are some specialty programs that allow people with an insurable interest to obtain a policy. Say you’re Brittany Spears’ publicist, this makes your livelihood depends on one person; there is a specialty program that allows you to obtain a death benefit from a life policy without the insured persons’s knowledge. My guess is the premiums would be fairly steep.
You should mention programs like this one from Lloyd’s of London. It is still only available in very limited circumstances, but I would hate for you to be wrong about something.
http://www.piu.org/confidential_life_insurance.html
Thanks Aaron, I never heard of such; I’ll keep this in mind when I become Led Zeppelin’s new manager.
It would be nearly impossible for this to happen. Insurers want to know and understand a relationship between insured and policy owner. Plus you, as the insured, would need to undergo some underwriting.