How To Give the Gift of Life Insurance
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You can gift life insurance to someone else either by designating them as the beneficiary of your life insurance policy or giving them a policy that could provide a death benefit for their beneficiaries. A life insurance gift can provide your loved ones with a tax-favored payout after your death or a financial safety net for the people who rely on their income.
Check out the rest of the article for more information on gifting life insurance and what you will need to take out a life insurance policy on someone else’s behalf.
Can You Give Life Insurance To Someone?
You can give life insurance coverage to someone else either by gifting life insurance proceeds to them as a beneficiary or designating them as the insured for their own life insurance policy.
Gifting Your Own Life Insurance
One way to gift life insurance is to take out a policy on your own life and select someone else as the beneficiary, meaning they will receive a death benefit from your insurance company if you die during the policy’s coverage period. A major benefit of life insurance payouts is that they are generally tax free unless your whole life insurance policy has accrued interest above the amount of premiums paid into the policy.
Your policy can have multiple primary beneficiaries including your spouse, family members, charities, a trustee or your estate. You can also select contingent beneficiaries who will only receive a life insurance payout if your primary beneficiaries have already died or are otherwise unavailable.
Another option is to transfer ownership of your existing life insurance policy to someone else, meaning they could adjust the coverage amounts and change the beneficiaries that will receive a payout upon your death. While the new owner may have to start paying the premiums, they may also be able to access the cash value your permanent life insurance policy has already accrued while securing a death benefit for their selected beneficiaries without going through a medical exam for their own life insurance policy.
Buying a New Life Insurance Policy as a Gift
Alternatively, you could buy a new life insurance policy for someone else, meaning they would be the insured and the beneficiaries they select would receive a payout upon their death rather than yours. If you remain the owner of the policy, you could opt to pay the life insurance premiums on the insured’s behalf.
To buy life insurance for your parents or anyone else, you will need to get their consent first, so you shouldn’t plan on surprising someone with the gift of their own life insurance policy. In addition, you can only take out a life insurance policy on someone if you can demonstrate insurable interest, meaning that person’s death would have an impact on your finances. In general, it’s easiest to prove you have insurable interest in a close relative.
What Information Do I Need To Gift Someone Life Insurance?
In order to buy life insurance for someone else, you’ll need to share personal details about both the insured and the beneficiaries such as their names, addresses, phone numbers and Social Security numbers.
If you’re buying a policy that will cover someone else, you should also be prepared to share how much coverage the policy should provide including the size of the death benefit and any life insurance riders that should be added to enhance the policy’s coverage. Since you’ll need the other person’s permission to buy them a policy anyway, it’s best to discuss how much life insurance coverage they want up front so you won’t have to play a guessing game when it comes time to purchase the policy.
How Do I Buy and Gift Life Insurance for Someone Else?
You should collect life insurance quotes from three to five different insurance carriers in order to find the right life insurance policy for your loved one. While individually reaching out to insurance companies for quotes may be a tedious task, you can make the process simpler by going through SmartFinancial.
To receive your free life insurance quote, you'll need to complete a simple questionnaire where you can let us know how much coverage you’re looking for and how much money you can afford to spend on a life insurance policy. Then, we’ll quickly match you up with insurance agents in your area who can help you find the right policy for your needs.