In our last post, we discussed the insurable interest requirement in Tennessee. Under that requirement, the prospective owner of the policy must prove that he or she would suffer some type of loss if the insured were to die while the policy was in effect. This requirement prevents speculators from buying insurance on a person’s life in the hopes that the person dies before the death benefit exceeds the amount of premiums paid.
Obtaining and assigning financial instruments can be a lucrative business. So, sometimes, parties may try to structure a life insurance policy in such a way that it appears that the policy were supported by an insurable interest. Courts, however, may well scrutinize such policies, especially if it appears that a speculator used an elderly person as a conduit to acquire a beneficial interest in a life insurance policy that the speculator otherwise could not acquire.