Unfortunately, there is nothing I can do to save myself, but hopoefully we can make a change and prevent what my mother has done to me from happening to another innocent child.

There is an extremely interesting, and depending upon your perspective, somewhat troubling issue that exists in the world of insurance as it relates to close family members.  Many of you have probably never contemplated the issue that I'm going to raise and discuss in this article, however, if the issue were to ever directly affect you or one of your close family members, it could quickly increase its importance.  The issue that I intend to discuss is obtaining life insurance on a family member, particularly insuring the life of a child, without the insured person's permission – both at the time the insurance policy is acquired and perhaps many years hence.

 

          Normally, in order to obtain an insurance policy on the life of another, one would need to have a "insurable interest" in the life of that other person, the insured.  This is typically brought about in two separate contexts:  First, the insurable interest that a family member has in the life of another based upon co‑sanguinity or their marriage into one's family predicated upon the assumption that these relationships have a foundation based upon love and affection; and secondly the insurable interest that one person has in the life of a business partner because the first party has a pecuniary interest in the life of the insured – meaning that the first party would suffer some kind of financial loss if the insured were to die.  In this article, I am only going to focus on the first circumstance:  Insuring the life of another in a family relationship, particularly that of a parent insuring the life of a child.

 

          Under current insurance standards, and the law, a parent may obtain an insurance policy on the life of a child even without that child's knowledge or consent.   So, using as an illustration the circumstance in which a minor child's life is insured by a parent, this insurance policy may and will be obtained without the child's consent.  In the circumstance of a minor child, that child is not even at the age of majority when that child could properly consent to such an insurance policy anyway.  What happens, then, if that child (the insured) and the parent that has purchased the insurance policy (and is also the beneficiary of that same insurance policy) become estranged?  What would happen, according to both current insurance standards and the law, if this parent and child not only became estranged but developed a tremendous animosity towards one another?  Is there anything that the child (the insured) can do to terminate or cancel such an insurance policy?  The answer to that question, to this writer's great dismay, is that there is nothing that can be done to terminate or cancel such an insurance policy.

 

          The underpinning of this social policy which permits such an insurance policy is the assumption that the love and affection between family members ought to preclude the purchaser of such a policy from having the motivation to murder the insured simply to reap a financial benefit.  But if no such love and affection exists, why should it be permissible, according to current insurance standards and the law, for a family member to have such a financial interest in the death of the insured?  Not only that, but why doesn't the insured simply have some kind of right to choose who can hold and own an insurance policy insuring his or her own life?  The issue is quite different if one spouse is purchasing a life insurance policy on the life of the other spouse.  Courts in different jurisdictions have been split on the issue of whether or not the knowledge and consent of one spouse (the insured) is required in order for the other spouse to purchase a life insurance policy on the first spouse.  The statutory and case law authority in a majority of states requires the knowledge and consent of the insured spouse.

 

          Some states require the consent and knowledge of the insured to any life insurance policy procured by either a parent or a child.  This rule, however, does not apply to a child who is very young.  With very young children, there is no such requirement for knowledge and consent.  What ought to happen if the nature of the relationship between a parent and a child were to change such that a strong argument could be made that no insurable interest would exist any longer?  Illustratively, one can easily see that if a spouse purchases a life insurance policy, predicated upon love and affection between the two married persons, upon the occurrence of a divorce the insurable interests predicated upon love and affection ceases to exist.  However, notwithstanding the occurrence of a divorce, many states follow the rule that the insurable interest analysis needs only be considered at the time of the inception of the insurance policy, not at the time of the insured's death.  This means that even after the ugliest of divorces a former spouse could still maintain a life insurance policy on the other spouse.  The rationale against such an insurance policy ought to be quite clear:  Even in the midst of tremendous animosity between two former spouses where there is no further love and affection to prevent the thought of terminating the former spouse's life, one spouse may stand to gain a significant amount of money upon the death of his or her formerly betrothed.  The rationale and argument against allowing a parent to maintain a life insurance policy on an estranged child, particularly where there are tremendously negative feelings towards one another, should be no different.  Why should a parent continue to have a financial interest in the death of a child if there is no more love and affection between the two?  How do the insurance standards and the law treat that specific situation?

 

          The unfortunate reality is that most states continue to uphold the same rationale previously mentioned between two divorced spouses:  That the insurable interest analysis need only take place at the time of the inception of the insurance policy, not at the time of the insured's death.  The requirement of a love and affection insurable interest is supposed to prevent wagering contracts between family members and providing an incentive in the early death of the insured.  So, in the instance of an insurance policy purchased on the life of a child of tender years, such that knowledge and consent would not be required from the child in any state, and the subsequent deterioration of the relationship between the parent and the insured child, there is absolutely nothing the insured child can do to terminate or cancel the insurance policy previously obtained that now provides a significant incentive for the parent to have in the premature death of the child!  Furthermore, in such a situation, the parent may have absolutely no financial interest in the ongoing life of the child, as would be required when a business purchases a life insurance policy on one of its key employees.  Many states would not terminate an insurance policy on a key employee even after that employee has ceased working for the company that purchased the life insurance policy.  Again, the same analysis is used:  The insurable interest analysis is only used at the time of the inception of the insurance policy, not at the time of the insured's death.  Some courts have held that the insurable interest in a key employee does not survive the termination of the business relationship between the employee and the employer.  While this rationale seems logical, there is no corresponding policy governing the end of a loving and affectionate relationship between a parent and a child.

 

I feel the insurance companies need to acknowledge people have policies on their lives that they aren't aware of and thus procedures need to be put into action that at least notify a person if such a situation exists. 

 

Special thanks to Dave Roy and Associates, P.A. for their help in researching this matter www.DaveRoyLaw.com