Can somebody else secretly take out a life insurance policy on me?

In order to be the named insured on a life insurance policy, you have to grant your permission for the policy to be written. In other words, the insurance company will not allow someone to take out a policy on you secretly.

Without the requirement of approval from the insured person, anyone could take out a life insurance policy on their favorite rich and powerful person, knowing that they could cash in on that person's demise. They could take out a policy with your permission, such as when an employer is risking a loss in production or performance if you should pass away. In that situation, your life would be insured to protect the interest of the employer, and the employer owns the policy, typically naming the company as the beneficiary.

Another issue that insurance companies have with allowing someone to take out a policy secretly is the matter of "insurable interest." In order for anyone to take out a policy on your life, they would have to show an insurable interest in your continued well-being. In the previous example, the employer stood to lose financially if you passed away. In your private life, your spouse or children might stand to lose everything if you pass away.

If the person had power of attorney over your finances, then they would be able to take out the policy without your direct knowledge. This is possibly the only legal way for a secret life insurance policy to be purchased. In this situation, however, the person who purchased the policy would be authorized by law to act on your behalf, and the purchase would be indistinguishable from your own actions.