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Life insurance policy ownership

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The insured or the beneficiary: Who actually owns a life insurance policy?

There are three main components to a life insurance policy: the owner, the life insured and the beneficiary. Depending on the ownership type, the policy owner can be owner by either the insured or the beneficiary.

  • The policy owner. The owner can be either the insured, the beneficiary or a joint ownership between the two parties. The policy owner has full and total control and can cancel or change the policy.
  • The life insured. This is the person who’s life is insured against them passing away. If the life insured passes away within the term of the policy, then a payment is made to a beneficiary.
  • The beneficiary. This is the person who’s paid out in the event where the life insured passes away.

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What types of life insurance policy ownership are there?

Several types of policy ownership are available. Policy ownership can usually be changed, depending on the terms of the policy. Ownership types are as follows:

  1. Self ownership. Owned by the life insured.
  2. Cross ownership. Owned by the spouse or partner of the life insured
  3. Joint. Owned by both the life insured and their spouse/partner
  4. Corporate-owned life insurance (COLI). Owned by a corporate entity, for example, the employer of the life insured.
Can ownership be changed?

Policy ownership can usually be changed, depending on the terms of the policy.


What is the role of a life insurance owner?

Because the insurance contract is actually an agreement between the policy owner and the insurance company, the policy owner has complete control over the policy in question. The key roles of the policy owner can include:

  • Cancelling the policy
  • Updating the policy to include additional benefits or options
  • Adjusting the amount insured
  • Making changes to listed beneficiaries
  • Becoming the default beneficiary if there’s no beneficiary selected
  • Paying for premiums

Who can be the owner of a life insurance policy?

It’s important to understand the ownership structure of your life insurance policy. Each ownership structure has its own advantages and disadvantages, so read on to find out which one best suits your situation.

  • Self ownership. Self-owned policies are perhaps the most common form of life insurance. The life insured owns the policy and has full control over their own life insurance.
  • Cross ownership. This common approach for married couples entails each spouse owning their partner’s policy. Cross ownership has its advantages, especially for those who rely on someone else for a stream of income. However, if you get divorced and you have cross owned life insurance policies, difficulties may arise.
  • Joint ownership. A hybrid of self and cross ownership, joint ownership allows you to still have some control over your policy. However, keep in mind that any proposed changes to the policy must be approved and signed off by both owners. Once again, a divorce or relationship breakdown can result in difficulties.
  • Via a company or organization. Insurance policies can also be owned by a corporate entity. Businesses may take out key person insurance on an employee, and this lets them claim a tax deduction for the premium and also cover the loss of revenue resulting from the loss of a key person.

Life insurance owner vs. beneficiary

It’s important to point out that the role of the owner of a life insurance policy is different to the policy’s beneficiary.

The policy owner

The policy owner is ultimately in control and oversees many aspects of the policy, such as:

  • Paying premiums
  • Ensuring the right level of coverage remains in place
  • Determining the policy’s beneficiaries
  • Can change beneficiaries at a later date
  • Can make changes to the policy or even cancel it
  • Can also be the beneficiary

The beneficiary

A beneficiary is a person who will receive the life insurance payout upon death. Most people nominate their spouse or a child as their primary beneficiary, but who you choose is entirely up to you.

If a person listed as a primary beneficiary dies before the life insured, however, the payment passes to others listed on the policy — these people are known as contingent beneficiaries.

It’s possible for policies to have multiple primary and contingent beneficiaries, and you can determine the amount (in terms of a percentage) you wish each beneficiary to receive.

If a minor child is listed as a beneficiary, a guardian or trust will need to be assigned to receive any funds.


What happens if the life insurance policy owner dies?

What happens in these circumstances depends on whether the owner of the policy is also the life insured or not. If the policy owner and the life insured are one and the same, a benefit will be paid to the beneficiary and the policy will then be terminated.

However, if the policy owner is not the life insured, ownership of the policy would become part of the deceased’s will. Ownership can then be passed on according to the terms of the will. If no such terms are in the will, ownership will be set by laws of intestate succession.


What can I update on my life insurance policy?

It’s not uncommon for people to make adjustments to their life insurance policy as situations change. Such changes can include:

  • Change of policy owner
  • Change of policy beneficiary
  • Change of payment frequency
  • Change of amount insured
  • Change of address listed on the policy
  • Change of name on policy

In the event that you need to make adjustments to your policy, each insurer will have forms located on their website that can be accessed to request a change to the policy ownership or beneficiary. It’s worth noting that the policy can only be updated by the policy owner.

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William Eve

Will is a personal finance writer for finder specialising in content on insurance. While he cannot give personal advice to clients, Will enjoys explaining the intricacies of different types of protective cover to help individuals and businesses find affordable cover that won't leave them underinsured.

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10 Responses

  1. Default Gravatar
    lmJuly 19, 2018

    Person insures self w wife as beneficiary. Wife dies. Then person dies without naming beneficiary. Is policy dissolved? does it go under will? Thank you.

    • finder Customer Care
      nikkiangcoJuly 22, 2018Staff

      Hi lm!

      Thanks for contacting finder.

      The policy will not be dissolved unless it is paid out or used by the beneficiary. If the policy owner passes, it will go to the will. If there isn’t any will, ownership will be set by laws of intestate succession.

      Hope this helps!

      Nikki

  2. Default Gravatar
    SandipJuly 12, 2018

    Who is the real owner of the policy amount if the depositor is one who deposit the amount of insurance and another brother won’t?

    • finder Customer Care
      nikkiangcoJuly 22, 2018Staff

      Hi Sandip!

      Thanks for leaving a question on our page.

      The name registered as the policy owner, regardless of who makes the deposit, is the official policy owner.

      Hope this clarifies!

      Nikki

  3. Default Gravatar
    CLSJune 6, 2018

    Who owns a life insurance policy after the owner dies?

    Owner had whole life insurance policy on her husband (2nd marriage). Owner is the sole beneficiary. Owner’s two children are the contingent beneficiaries. There is not an owner designated upon her death.
    Owner has will that splits certain assets between husband and one child, but the policy is not mentioned in the will. There is a residual clause in the will that all the residual goes to the one child. The other child was specifically excluded from the will.
    Who is now the owner of the policy?

    According to your article, the estate is now the rightful owner and in this case, would technically belong to the child who was given the residual?

    • finder Customer Care
      JoshuaJune 10, 2018Staff

      Hi CLS,

      Thanks for getting in touch with finder. I hope all is well for you. :)

      Generally, A beneficiary is a person who will receive the life insurance payout upon death. However, you mentioned that the owner is the sole beneficiary.

      In this case, the payment passes to others listed on the policy — these people are known as contingent beneficiaries, which in your case, would be the two children.

      In your case, the estate can’t be the rightful owner, but the two children.

      Finally, to get a more personalised answer to your question, it is recommended that you look for legal and professional help.

      I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

      Have a wonderful day!

      Cheers,
      Joshua

  4. Default Gravatar
    GeorgeMay 27, 2018

    My grandparents had a life insurance policy on me in case i died they would get paid. They passed away so who gets the money? I live in Florida

    • finder Customer Care
      JoanneMay 28, 2018Staff

      Hi George,

      Thanks for reaching out.

      You may need to check and review on the policy purchased for you so you can confirm that you are the actual policy owner and for you to check on the details and status of the insurance once you contact the insurer.

      As the policy owner, you would have the full control over the many aspects of the policy, such as:

      *Paying premiums
      *Ensuring the right level of coverage remains in place
      *Determining the policy’s beneficiaries
      *Can change beneficiaries at a later date
      *Can make changes to the policy or even cancel it
      *Can also be the beneficiary

      It would be best that you check on the policy and seek assistance with an agent or the insurer for you to get additional details.

      Cheers,

      Joanne

  5. Default Gravatar
    VperfectFebruary 19, 2018

    Owner of life insurance policy dies but is not insured person. No will. Does the policy go to insured to continue paying premiums or is policy cashed out and put towards estate assets?

    • finder Customer Care
      RonMarch 12, 2018Staff

      Hello Vperfect,

      Good day! Appreciate you contacting finder regarding your inquiry today.

      If the policy owner is not the life insured; when he dies and has no will, ownership will be set by laws of intestate succession. You may want to check with your state website for details and restrictions on intestate succession.

      If you wish to seek legal assistance from a lawyer to assist you regarding this, you may refer to this page — https://www.finder.com/mortgages/legalmatch.

      Hope this helps!

      All the best,

      Ron

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