Dear Penny: Was My Cousin Allowed to Buy Life Insurance on My Mom?

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Dear Penny,

My mother died after several years with Alzheimer’s in the Philippines. While she was living in Maryland, a cousin took an insurance policy on her. She agreed knowing that she would only pay $50 a month and the rest will be shouldered by her niece. 

Now my cousin is asking for four death certificates and wants me to fill out forms because, according to her, I am the beneficiary. If she is the owner of the policy, what does it have to do with me? I asked for a copy of the policy because I have no idea what she is trying to do. Please help.

-Confused Daughter

Dear Confused,

Trust your gut. Don’t give your cousin your mother’s death certificate or any personal information she asks for.

There are a lot of things that sound sketchy here. The biggest red flag is that your cousin owned a life insurance policy on your mom. You can’t just take out an insurance policy on anyone. Just imagine how rife for abuse the system would be if we could all make bets on one another’s lives.

Dear Penny

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To own a life insurance policy on someone else, you need to have an insurable interest in their lives, meaning you’d suffer a financial loss in the event of their death. It’s typically assumed that you have an insurable interest in the life of your spouse or your child. You can even have an insurable interest in the life of your ex-spouse if they’ve been ordered to pay you alimony or child support. But it’s unlikely that a niece would have an insurable interest in the life of her aunt, unless there were unusual circumstances — like they were business partners or your cousin had co-signed a loan for your mom.

You also need the person’s consent to take out insurance on their life. I have to wonder: Did your mother fully understand what she was signing? Or if you only recently discovered this policy, is it possible that your cousin could have forged her signature? It’s also odd that your mother was making partial payments if your cousin owned the policy.

It’s pretty implausible that your cousin would have bought life insurance for your mom out of the goodness of her heart. A more realistic explanation would be that she plans to pocket most, if not all, of the proceeds.

You can continue to press your cousin for a copy of the policy. But don’t be surprised if you’re met with a flurry of excuses and convoluted explanations. Even if your cousin does provide you with the document, I wouldn’t assume it’s legitimate. Contact the insurance company directly to verify the policy. You can provide the death certificate to the insurer directly if it’s legit. The company can send you any necessary forms.

If your cousin won’t cooperate, you can search the National Association of Insurance Commissioners online life insurance policy locator. The organization will ask participating companies to search for policies in your mother’s name. If they locate a policy and you’re the beneficiary, they’ll provide you with the details. Your cousin doesn’t need to be involved. Even if you’re not a beneficiary, you’d probably be authorized to receive this information as your mother’s next of kin.

If you believe your cousin had nefarious intentions, consider contacting your state insurance commissioner. Some people are hesitant to report family members to authorities. But if you suspect your cousin scammed your mother, she could easily do the same to others. Elderly people are especially vulnerable to being conned by people they trust, like family members. At the very least, you should warn other family members if you think that’s what happened.

Your cousin probably acquired identifying information about your mother, like her Social Security number, when she obtained the policy. Unfortunately, deceased people are at risk of having fraudulent accounts opened in their names. A smart move would be to contact each of the three credit bureaus to let them know that your mother has died.

I’m sorry that you have to deal with all this on top of the loss of your mother. But you have every right to be suspicious here. Don’t let anyone, especially your cousin, tell you otherwise.

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Robin Hartilll is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].