Who Can Take Out A Life Insurance Policy On Someone Else? 
Life insurance purchasers are required to have an insurable interest in the life of the insured . Insurable interest generally must exist at policy inception . The underlying principle is that a purchaser must have a reasonable expectation of profit or benefit from the continued life of the insured . When you take out a policy on the life of another , there are limits on who can own the policy : 1 . Family members related by blood or marriage have an insurable interest in each other e.g. Parent/child and child by adoption , siblings , spouse , grandparents/grandchildren , and in some states , engaged couples . There is generally no insurable interest in nieces/nephews , cousins , aunts/uncles , other relative by marriage or stepparents/stepchildren . 2 . Creditors have insurable interest in a debtor to the extent of the debt . 3 . Business relationships which give rise to a financial dependency : an employee can insure an employer or vise versa . Partners can insure each other . Key employees can be insured by their employer . So , for example , two cousins who would otherwise not have an insurable interest , jointly own a business and therefore have an insurable interest in the other . Note that the life insured always needs to consent to the insurance with their signature and would need to consent by signature to the release and use of their medical information in the underwriting process for underwritten policies . 