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Can an insurance agent in one state issue a life insurance policy for another person living in another state?

We live in the state of NJ and we had a baby in 2009. My father-in-law, who lives in MD and who also happens to be an insurance agent in MD, took out a whole-life insurance policy on my child without my consent. Can my father-in-law do this and is the policy valid if he did it outside the state of MD?

Public Comments

1. Yes, a grandparent can take out a policy on the child. As he lives in Maryland, he'd have to buy it from a Maryland agent, or at least an agent licensed to sell insurance in Maryland. Most of the time, these policies, like Gerber policies, are sold directly - and Gerber does, to the best of my knowledge, have a license to sell insurance in every state.
2. The fact that your father in law is the policy owner and the applicant it is perfectly valid to "issue" a life insurance policy even though the insured (your child) is in another state.
3. Most of the time the insured (your child) needs to be in the State where the policy is written when it is written. So, if you were visiting your father-in-law at any time in MD and that is when he took the policy out, and if he is the policy owner, then he can take the policy out because the insurance company will agree that he has an "insurable interest" in your baby's life because he is family.
4. The answer is yes if that agent is licensed in his home state and has approval in the other state. However, moral ethical issues has been raised. For one, is there insurable interest between the father-in-law and your child? Where was the policy sold? Was it sold in NJ or MD? I believe there are laws governing selling policies outside of your home state such as the person being insured (your child) must be living in the state (NJ) where the policy is being sold? If you want to file a complaint, you should address them to your father-in-law first before going to the NJ Dept of Banking & Insurance. By the way, I think your father-in-law only did this to get commissions. After 12 months, he is very likely going to cancel it since whole life insurance are expensive and are ripoffs.