Is it possible to take a life insurance policy out on a family member such as a half-sister?

Question

The situation. I have a 36 year old sister with cancer who is not getting any better. She has a 13 year old son, who will be staying with my father and I if she is to pass. We all live together, and share the expenses, but she is horrible with her money. She makes good money and has recieved a partial already on her life insurance and she just blows it. I am worried that she has not left money for my nephew, that and she has many many bills that I know she is going to leave us with. I love her dearly, I don't know where I would be today without her. I am not meaning to sound greedy or anything like that, but I want the best for my nephew, and for our family if we do lose her.It will be hard enough on him as it is, but we would like to be able to leave her name in good standing, and be sure that my nephew will be able to do the things he would have been able to do if she were still with us down the road.Is it even possible for my father and I to take out a life insurance policy for her?

Anonymous · Accepted Answer

If you have "insurable interest" meaning if you are the person who will be making funeral arrangements...
OR if you will be taking care of her children after she's gone - you have insurable interest and you can be beneficiary

There are other situations that fit also - I've written policies on roommates (both female) who wanted to cover the mortgage when they bought a house together - knowing that neither of them could make the mortgage payment alone - so the different forms of insurable interest are limitless

Richie Rich · Answer

Can't do anything for the sister since it is now classified as pre-existing.  If she has a house that is not paid for, the bank will take it back.  Any unsecured debt, that is in her name ONLY, will come out of the estate first then pretty much go away.  Secured debt will be paid for by what ever is securing it...then the estate pays for the difference.

Her retirement accounts, unless they have a beneficiary, will go to the estate first then what ever is left to the child's guardian if underage.

If the policy is a cash value type policy, upon death that gets taken from the death benefit IN ADDITION TO fees and interest.  What ever is left will go to the child or his guardian.

If it is a Term policy, my condolences for your soon to be loss.  They only pay out when there is 6-12 months left to live.

Any accounts that have been setup for him, depending on the type, should be protected from estate collections.

Anonymous · Answer

Well, sure, you just need her permission and cooperation. 

But she's got cancer, so it's not like you're going to be able to buy it for less than it pays out, ya know?  So I don't think that's what you're looking for.  If you CAN pay out $110,000 for a polciy that pays $100,000, you could just put that money in the bank towards her expenses, anyway.  

You're NOT going to get odds on someone with cancer.

Anonymous · Answer

There are policies that are gaurenteed issue but she would have to live for at least two years after the policy is taken out.

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Is it possible to take a life insurance policy out on a family member such as a half-sister?

4 Answers