Insurable Interest And Slayer Statutes: How They Limit Who Buy And Recover On Insurance
Believe it or not, the government doesn’t want to give people a financial incentive to commit murder. This may sound obvious but around 100 years ago there were major problems have with people killing others for life insurance money. This was a tactic used by some of the world’s most sinister criminals of the day. There are numerous examples of strangers purchasing life insurance policies on other strangers, and then having them killed for the Insurance payout.
This led to a series of major reforms on who could insure the life of another person. The most significant change was to require a person purchasing an insurance policy on another person’s life to have what is called an insurable interest. The concept of insurable interest requires someone to have a specific kind of relationship for a life insurance policy to be payable. The most common example of a permitted relationship is a direct family member or close relative. It is presumed under the law that there is a minimal incentive for a family member to kill another family member for life insurance money. Sure, it may occasionally happen, but certainly not on the scale of organized crime 100 years ago.
Another type of insurable interest is based on a position of financial reliance. The law permits someone to insure another person’s life if their death could have a direct financial impact. For example, business owners may purchase a life insurance policy on a business partner’s life. The purpose of purchasing the policy in this example is to facilitate a buyout of the dead partner’s estate. This will allow the business to continue while the dead partner’s heirs are made whole.
Likewise, a bank or financial institution may insure the life of a debtor who owes a lot of money. This minimizes the risk of loss in the event of an untimely death.
Have we had several cases involving life insurance policies insuring the life of a former spouse. The reason for the insurance policy is because money is owed for items such as alimony, child support, and other divorce settlement obligations.
In all of these examples, there is evidence have a financial relationship or reliance on another person hello. In these cases, the wall permits someone to purchase a life insurance policy on another.
HOW DOES INSURABLE INTEREST APPLY TO OTHER TYPES OF INSURANCE?
The concept of insurable interest also applies in other types of insurance. The most common example, is a person cannot insure property that they do not have an interest in. The reasoning behind this limitation is the law wants to reduce the incentive to intentionally cause property damage for an insurance payout.
DOES INSURABLE INTREST LIMIT WHO YOU CAN DESIGNATE AS A BENEFICIARY?
It is important to recognize that a person can always purchase a life insurance policy and designate any person or other legal entity of their choosing. The insurable interest rule only prohibits someone from purchasing insurance on the life of another person.
WHAT IS THE SLAYER STATUTE?
Most states have a law generally referred to as the slayer statute. These types of laws state that a person is not permitted to profit off of murder. We have seen horrific examples of have family members killing others for an insurance benefit. In those cases, the slayer statute operated to prohibit a beneficiary from recovering have the insurance money.
Importantly, the person does not need to be proven guilty of murder for the slayer statute to prevent them from recovering a death benefit. Instead, an insurance company seeking the protections of the slayer statute need only show that more likely than not a beneficiary caused or contributed to the life insurance death.
HOW CAN AN ATTORNEY HELP ME WITHAN INSURABLE INTEREST ISSUE?
Insurable interest issues can often be complex. If you have been denied an insurance death benefit on the grounds that you did not have an insurable interest, you should consult an attorney to discuss your specific issue. An attorney may be able to present evidence, documentation, and legal arguments establishing that there was an insurable interest.
It is also not uncommon for an insurance company to wrongfully delay or deny an insurance claim. If your claim has been improperly denied or delayed, you may have a bad faith insurance claim handling case. At a minimum, your insurance company should reimburse the premiums paid in the event there was no coverage.
The MIC Firm focuses on representing people with insurance coverage issues. Our goal is to help you maximize your policy benefits and guide you through complicated coverage issues. If your claim has been denied due to an insurable interest of even slayer statute issue, call us for a free consultation.