Life insurance beneficiary advice please!

blufink

I'm lending a friend some money. I want to insure the loan against his death and the possibility his estate won't have enough in it to pay me back if he dies before he can do so.

Can he make me a beneficiary of a life insurance policy?

How can I protect the proceeds of the policy?

TIA

InsideInsurance

As long as you have an insurable interest at the point of you buying the insurance (ie the loan) then you can buy the insurance on their life yourself rather than having to get him to buy it and declare you as the beneficiary.

Quentin

blufink wrote: »

Can he make me a beneficiary of a life insurance policy?

Yes.

All the proceeds would go straight to you (no need to wait for probate etc)

If the loan is repaid prior to the policy paying out, then he can change the beneficiary.

ACG

You can either take out life of another policy - in which case you would insure against their life and it gets paid to you.

If you want the other person to take out the policy they can do and would need to set the policy up in trust.

Either way i think you might need to speak to an advisor as not many companies do life cover on life of another basis and of those i cant think of any off the top of my head that deal direct with the public.

kingstreet

If it's an existing policy, he would have to write it in trust for your benefit.

If it's going to be new cover, you can take out the policy (and pay the premiums) on his life. This is known as "life of another" business.

Alternatively, a new policy can also be written in trust.

If this is to be a short-term arrangement, the trust idea probably works better as the beneficiaries can be changed later when the debt is repaid. You can be a trustee to prevent him changing them without your agreement.

If you write the cover on a life of another basis, the policy can't be amended, only cancelled when the debt is discharged.

An Independent Financial Adviser would be your best bet for setting this up properly.