"The Insurable Interest in a Life Insurance Policy
To stop your good neighbor Sam from taking out a life insurance policy on you and then killing you to get the life insurance money, your neighbor, as the purchaser of the insurance policy, must have an insurable interest in the life of you, the person being insured at the time of application. In dealing with life insurance, a person is deemed to have insurable interest when the purchaser has a reasonable expectation of profit or benefit from the continued life of the insured.
Every state requires that an insurable interest exist at the time of application. Policies issued on lives where there is no insurable interest are regarded as void from the beginning because they are against public policy. They are against public policy because they encourage murder for profit. If there was no insurable interest requirement, some people would be tempted to purchase life insurance policies to collect the death benefit by killing the insured.
A person is always considered to have an unlimited insurable interest in his own life and health. Therefore, the beneficiaries of the policies that an insured purchases on his own life do not need to have an insurable interest. It is presumed that the insured would name as a beneficiary only people who want the insured to live a long and healthy life. A person, therefore, can obtain as much insurance as he wishes on himself – subject to other limits an insurance company might have. For example, insurance companies commonly limit the amount of insurance they will place on a person to that appropriate to his income and life style.
Determination of insurable interest
Courts and state laws have established guidelines for those persons and entities presumed to have insurable interest. They fall into three general categories – relations by blood or marriage, business relationships, and creditors.
Blood or Marriage: People generally have an insurable interest in the lives of their spouses and dependents. Based on this relationship, the general rule of thumb is:
Insurable Interest
Husbands and wives
Parents and children
(including adopted children)
Grandparents and grandchildren
Brothers and sisters
Engaged couples (some states)
No Insurable Interest
Other relatives by marriage
Nieces and nephews
Cousins
Uncles and aunts
Stepchildren and stepparents"
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I am quoting the above from law.freeadvice.com. And, the research I have done for my state agrees with the above. As a grandparent I am within my legal right to take out a life insurance policy on any of my grandchildren so long as they are related to me through blood or legal adoption.
Many grandparents buy life insurance policies in the event that something happens. It doesn't generally mean that the grandparents are hoping something happens to the child and they are looking to get rich off of their grandchild's death. I guess what I am trying to say is that if I decided to buy life insurance for my grandkids, I would hope that my kids' spouses or my kids wouldn't think I was wishing for something horrid to happen. I also would not give my children ownership over the policy, because then they could choose to cash it in for its cash value. Obviously, if I were to buy life insurance it would meant to be used in the event my grandchild died.
I don't know your situation with your fil, but since the papers came to your address it doesn't sound to me like it was something he was trying to hide.