Buying TERM LIFE INSURANCE on someone

[danno1]

Without sounding like a "parasite" or being ghoulish, I have a question regarding taking life insurance out on someone. Here is my concept. The person I'm referring to is 72 years old & rather indigent. He is my stepfather's cousin. He borrows money which he does pay back. But I was thinking of a plan....GIVE him $5000 cash to do with what he wants to (buy a TV, clothing, car tires or refrigerator or whatever)...if he agrees to my taking out a life ins. policy on him with myself as the beneficiary.
Now, I realize this sounds ghoulish, but the $5K advance would justify this but my question remains, can I actually do this? If so, what is a good insurance company and the actual type of insurance you would recommend? I know he would agree to it and I could even draw up a small contract/agreement he and I could sign between us and then have a friend I know, notarize the agreement. Has anyone ever done this? The person I speak of has no burial insurance, no savings or other income - never was in the armed forces and only gets an SSI disabilty check each month. Feedback, comments and constructive criticism would be appreciated.
Thank you.

 

[Maurice]

Is this a person or a bond?


While the 'insurable interest' concept varies by state, I think you'd have a hard time meeting the standard just about anywhere.

I think he could take out a policy on himself and name you as beneficiary, though.

 

[danno1]

Thanks Maurice:
Basically you hit the nail on the head:
"I think he could take out a policy on himself and name you as beneficiary"

So I'd give him $5K (he gets around $1200 per month-but monthly bills leave him indegent) draw up a contract with him naming me as beneficiary but the big question then, is how much per month his payments would be? Or annual premium would be. I'm located in Michigan....

 

[JOHNNIE36]

When I was with GM, I had a life policy of which the amount was governed by your salary. We also had the option for an equal amount on a policy which was "owned" by my wife. As I remember, a policy of this type doubled my life insurance, but the policy and amount that she "owned" would not be taxable upon my death. This was available to all exec level management country wide. Now that we lost all our health care, dental, vision, and life insurance I just gave up on all that stuff. I had the option to rejoin life insurance through Metropolition but I said the hell with all that. DW decided she didn't need it. Anyway, I would think policies of this type are available.

 

[mickeyd]

Without sounding like a "parasite" or being ghoulish, I have a question regarding taking life insurance out on someone. Here is my concept. The person I'm referring to is 72 years old & rather indigent. He is my stepfather's cousin. He borrows money which he does pay back. But I was thinking of a plan....GIVE him $5000 cash to do with what he wants to (buy a TV, clothing, car tires or refrigerator or whatever)...if he agrees to my taking out a life ins. policy on him with myself as the beneficiary.
Now, I realize this sounds ghoulish, but the $5K advance would justify this but my question remains, can I actually do this? If so, what is a good insurance company and the actual type of insurance you would recommend? I know he would agree to it and I could even draw up a small contract/agreement he and I could sign between us and then have a friend I know, notarize the agreement. Has anyone ever done this? The person I speak of has no burial insurance, no savings or other income - never was in the armed forces and only gets an SSI disabilty check each month. Feedback, comments and constructive criticism would be appreciated.
Thank you.

This is too creepy. I will assume that it is a joke.

 

[danno1]

JOHNNIE: sorry about your losing the life insurance. Was this anything to do with GM restructuring? I know someone who took early retirement in his 50's before all that tumult and he did good....he bought lots of land while working there, in north michigan when lake frontage was a hundred bucks a square foot....now it's over a grand and he has a bunch of property he doesn't know what to do with.
Mickeyd: My concept is not a joke...people are doing it. If you're married, you can take a life policy out on your wife (just don't do anything crazyLOL). If not, you'd be wrong not to. I know a guy who insured his grandma! But I was wondering if this can be done where you can buy a policy on someone who is not a blood relative.

 

[ERD50]

Creep factor aside - I think you can do this if the insured agrees (may vary by state). But financially - what makes you think you can "win" a bet with a company whose sole reason for being is to make a profit on these transactions (on average)?

Unless you know something the insurance company doesn't, and they won't find out. But then we are back to the "creep factor" (and possible legal issues).

-ERD50

 

[SecondCor521]

Here's a way you could do it:

1. You "gift" him enough to buy the policy, maybe the first year's premium.
2. He buys a policy on himself and names you as a beneficiary.
3. He "gifts" the policy back to you.

I did something similar in that I owned a life insurance policy on myself with my wife as a beneficiary. When we divorced I was able to do some paperwork to sign it over to her. Of course as my ex she definitely had insurable interest -- I don't think they asked that question at the time.

But I do agree with ERD50 -- I doubt you could get term life on someone that age for more than a few thousand dollars, and the premium on a whole life policy would be high enough to convince you this is not as good an idea as you think. If you're thinking a 72 year old is likely to die soon, I assure you the same thought has occured to the life insurance company.

2Cor521

 

[freebird5825]

You did not provide too much about your own relationship with this gentleman, so the validity of "insurable interest" is unknown.

I think there may be better ways for you to "help" him than the life insurance policy approach. I give that a solid 2 thumbs down.

Why not just give him the $5K (or less) if his living conditions are that tough?

 

[danno1]

ERD: I think the term "creep factor" sounds pretty cool....but I'm not trying to win a bet or make "easy money". It's like 2NDCor521 says I may be thinking a 72 yr. old will die soon....I understand that assumption. I'm just speaking from an ethical standpoint and I hope it sounds understandable where I'm willing to offer an advance of $5K for him to at least use (more ethical than unethical) to enjoy a few things in life. Let me say this, he would no longer have to borrow money...which I get tired of doing...OK, it's in small increments....but when you multiply it over various people, it gets a bit much. Creep-factor aside, keep the ethical aspect in mind. I wouldn't want to necessarily seem like some vulture on a tree branch, looking down at some decrepit gunslinger breathing his last breath....that's a bit of a stretch. But I can understand the (creep factor) assumptions....

 

[FIREd]

And how much do you think it would cost -monthly- to buy a life insurance policy on a 72 year old man with disability? I bet it's pretty high. I don't know if it's worth it. If you feel for the guy and feel charitable, just give him the money.

As far as the ethical aspect: as long as he agrees with your plan, why not.

 

[Sarah in SC]

Insurable interest comes into play here. I suppose you could convince a company to let you take out a policy on him, but I wouldn't think a legit company would be willing.

The only option I think would be possible is what has been mentioned, for him to take out the policy and name you as beneficiary. But the premiums will be commensurate with the risk and these companies are in the business of making sure they make more money than you do.

You could look up what a term policy would cost at that age using one of the online calculators pretty easily.

 

[bbbamI]

I keep seeing relatives showing up at his demise and finding the paperwork....

 

[danno1]

Freebird:
As previously mentioned, it is my stepdad's cousin. He keeps complaining of being the blacksheep on that side, etc. But I cannot justify handing out $5000 here and there. Just doesn't make sense. Wish someone could hand me $5 large....I've had to invest and save, make sacrifices and watch spending to accrue some savings to where I've come to date. In any case, I certainly appreciate all this input....

 

[ERD50]

But I don't understand why you think this provides any financial benefit to anyone (other than the ins co)?

You give him $5,000 - where does that and the premiums come from? The ins co plans to collect more from you over time than they give you at the end (include the time value of money in the calculation). That's why they are still in business.

-ERD50

 

[samclem]

Plus, even if he signed a contract, he might not continue to pay the premiums. If you paid them for him (to make sure they got paid), I bet he could still change the beneficiary at any time (it's his life insurance policy, after all). So, you'd be out the $5000 you gave him, plus all the premiums you paid. What are you going to do--sue his estate for breach of contract to get the $5k?

Even disregarding the (large) creep factor, it doesn't make financial sense.

 

[freebird5825]

Freebird:
As previously mentioned, it is my stepdad's cousin. He keeps complaining of being the blacksheep on that side, etc. But I cannot justify handing out $5000 here and there. Just doesn't make sense. Wish someone could hand me $5 large....I've had to invest and save, make sacrifices and watch spending to accrue some savings to where I've come to date. In any case, I certainly appreciate all this input....

Gotcha.
What I meant by my question was...is he like an adopted uncle to you? A very good friend?
On a small scale, you could buy him groceries and deliver them if hunger is the issue.
If he cannot fend for himself, there are a ton of programs, usually funded at the county level, for older persons to get help with food (Meals on Wheels), utilities (our statewide utility corporation has something called Care and Share, funded through donations), medical checkups (county home visiting nurse program), and transportation (senior center volunteers).
If he is too proud to participate, then I don't know what you can do about that.

 

[danno1]

Hey Freeb: Actually the dude can drive and shops on his own etc. He has had stomach surgery several years ago, heart bypass and also was in a bad car crash caused when his carotid arteries were so clogged, his brain wasn't getting enough co2 and he passed out on the freeway, went off the road into a culvert and totaled out his other car.
He wound up in the hospital with a few busted ribs, broken hip that now has screws and minor cuts, bruises and sore all over. Isn't overweight or anything like that....just raised alot of hell in his younger days I reckon. Hell, he married and divorced the SAME woman FIVE different times....he's single again and said he is "done". His daughter doesn't have enough money to help him...in fact, she borrows from HIM. But since he has no coverage, I was wondering if my "creep-meistering" had potential....I think not. He'll have to be tossed in Potter's Field I reckon or cremated-although who will pay the $3500 to $4K is beyond me, I have enough of my own self to deal with if you know what I mean. Good hearing from you.
He does get food commodities btw and averages around $1200 per month in SSI-dis.

 

[quietman]

What if this kind of "creep factor" insurance becomes readily available. This is not all that different from viatical "investments" where someone advances an elderly (or terminally ill) person a portion of the death benefit of an insurance policy, in exchange for the rights to the death benefit when the person finally dies. For AIDS patients this turned out to be a bad investment when new drugs came on the market. For others, its a strange and creepy bet. I certainly wouldn't want people I don't know having significant financial interest in my early demise.

Might make a good high stakes way to set up a death pool betting game.

 

[danno1]

Well QM, I do in fact know this person relatively well....but only related through my stepdad (who is now dead), as it is his cousin.

 

[quietman]

I didn't mean to suggest that you were in any way planning to make a financial killing on this transaction by, well, killing someone. Just making a general observation that I prefer if people wholly unrelated to me do not have a financial interest in my demise. I do expect to inherit from elders in my family, as I expect to will my assets to generations behind me. I trust all involved and have no worries about it. OTOH, if a bunch of people from NJ that I don't know were suddenly able to buy millions of dollars worth of life insurance on me, I'd be more than creeped out.

 

[danno1]

point well taken QM! Good feedback . . .

 

[brewer12345]

There at least used to be a thriving market in "stranger owned life insurance" before the credit bubble burst. Don't know if this stuff is going on still, but there used to be two flavors:

- Investor buys an existing policy that an older person no longer needs. Then they wait to collect.

- Investor hands money to an older person to go get a big LI policy. After 2 years, the elder signs over the policy to the investor for a cash payment and the investor waits to collect.

Generally speaking, this sort of investment only made sense if you had a few actuaries on staff who could try to outwit the insurers and if you had enough money to have a diversified pool of policies. One off is a fool's game, and the whole thing reeks of the charnel house to me.

 

[Sarah in SC]

As for burial costs, one way to remove this potential expense is for him to donate his body to a local medical college. Once they are done with it, the body is cremated at no cost to the family. I think you can even get the ashes back if you want them.

My great aunt did this, even though she had plenty of money to leave for a funeral. She instead left a few thousand for us to have a big party in her honor.

 

[freebird5825]

...Just making a general observation that I prefer if people wholly unrelated to me do not have a financial interest in my demise.

This is an excellent point, in any case, not only the OP's situation.
dh2b suggested that after we marry, he set up his will so that I would inherit everything and whatever I did not need/use, would then go to his own children upon my daisy pushing act.
I put the kibosh right on that one. The thought of my continued health being tied to someone (completely unrelated) not getting their money was a complete creep out to me.