Can Someone Buy a Life Insurance Policy in My Name Without Permission?

If true crime podcasts have taught us anything, it's that people do bad things to people they claim to love.

Buying a life insurance policy allows you to provide financially for those you care about even after you die. But what if someone else wants a policy on your life and decides to name themselves as the beneficiary? Would it be possible?

The answer is no

Purchasing a life insurance policy always involves the person named on the policy. Insurance companies will not allow anyone to buy insurance in your name without your agreement. The only exception to the rule is when a parent or grandparent purchases a child's life insurance policy. In the case of grandparents, parental consent is typically required.

Insurance policies can be worth so much money, making it tempting for greedy people to seek a way to inherit. Unfortunately, attempting to cash in on someone else's death is not new.

The creepy history

Stranger-owned life insurance (STOLI) is not only illegal, but it is also tricky to pull off. Back in 18th century England, some criminals took out life insurance policies on people they knew to be in poor health, naming themselves as the beneficiaries. The companies issuing the policies had no way to access the insured's medical records or determine the risk level.

Once the insured died, insurers were on the hook for payouts to the beneficiary. It was a pretty effective scheme for a while, and some people made real money running the scam.

The scam was successful enough to make its way to the U.S., where some people saw it as a wager. They paid money upfront, hoping the person they were insuring did not have long to live.

The practice was eventually outlawed in both the U.S. and England.

Negative outcome -- for the scammer

Say someone decides they want to take out a life insurance policy with you as the insured. Not only would the life insurance company require your consent, but the person buying the policy would have to prove that they have an insurable interest in your life.

Even if someone tried to get around the law, it would be tough to pull off. Here are four reasons why:

1. The person is unlikely to have access to all the information requested on the application form. They'll need to provide your height, weight, hobbies, employment, personal and family medical history, and Social Security number.
2. The life insurance company won't just take their word for the information provided on the application. They will probably check to make sure you live and work where stated. In short, they will try to contact you at some point, and the jig will be up. You'll know someone is trying to take out insurance in your name.
3. The scammer would have to forge your signature to take out a policy without your knowledge. According to Boonswang Law, if you die within the two-year contestability period, the insurer's fraud department will review the application and medical questionnaire with a fine-tooth comb. If they find anything that seems "off," they're likely to deny the claim, and the grifter will end up with nothing (except fraud charges and a possible prison sentence).
4. If you die after the contestability period, the swindler will need an original death certificate to file a claim for benefits.

Not worth the effort

Although life insurance scams were once lucrative, there is so little chance of getting away with it today that smart criminals should know it's not worth the effort.

Although it's nearly impossible for anyone to get away with cashing in on a life insurance policy you knew nothing about, there are plenty of other ways dishonest people can take advantage of you.

Be mindful of who has access to your personal information, like your Social Security number. The better you protect your identity, the less chance anyone has of defrauding you.