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Whose life can be insured against death and disability?
Key takeaways
- You can insure your own life against death and disability as long as an insurer will accept the risk.
- You can also insure the life of a spouse or life partner, or another person, such as an employee or a business partner as long as you can prove that their death would impact you financially.
You can insure your own life against death or disability as long as the life company is willing to accept the risk.
Someone else, however, can only insure your life if they are your spouse or life partner, or if they can prove that your death or disability would result in a financial loss for them. This is referred to as having an insurable interest.
It means you cannot take out life insurance on the life of someone with whom you have no relationship.
Generally, you can take out life cover on the life of:
A spouse, life partner or fiancé;
A child – but there are limits on how much cover you can take out;*
A key employee (key persons insurance);
Anyone who supports you financially;
A business partner; or
A person who owes you money.
The Long-Term Insurance Act limits the amount for which a child may be insured to a maximum of R20 000 if the child is under six years of age, or R50 000 if the child is between the ages of six and 14.
Cover can be declined
Life insurers may not accept you for life or disability cover if they assess the risk of you dying or being disabled as too high.
They may also not accept your application for disability insurance:
If there is an age limit, particularly if the cover is based on a disability definition that relates to your ability to work and you are at, or beyond, traditional retirement ages.
If you already have an illness or injury - it may be excluded from cover or you may be denied cover completely.
If you are not working and you apply for a disability definition that is based on your ability to work.
If you want to take out disability cover on someone else’s life but you do not have a financial interest in them not being disabled – for example, the person is not a spouse or business partner.
