Owner/Insurance Broker, KM Health Insurance Services, Hazel Crest, Illinois
This is a great question. The owner of the policy is normally the insured, and also the insured normally is paying for the policy. However, in some cases, the insured is not paying for the policy and does not want control over it. For example, I have clients where the adult child pays for and is the owner of their parents' policy.
Co-Founder, Coastal Financial Partners Group, California
Who should own a life policy depends on facts and circumstances surrounding the purpose of the insurance. Often the owner is the insured and names a spouse the beneficiary.
Life insurance purchasers are required to have an insurable interest in the life of the insured. Insurable interest generally must exist at policy inception. The underlying principle is that a purchaser must have a reasonable expectation of profit or benefit from the continued life of the insured.
You have no limit on insuring your own life so you can name anyone as the beneficiary of your own policy.
When you take out a policy on the life of another, there are limits on who can own the policy:
1. Family members related by blood or marriage have an insurable interest in each other e.g. Parent/child and child by adoption, siblings, spouse, grandparents/grandchildren, and in some states, engaged couples. There is generally no insurable interest in nieces/nephews, cousins, aunts/uncles, other relative by marriage or stepparents/stepchildren.
2. Creditors have insurable interest in a debtor to the extent of the debt.
3. Business relationships which give rise to a financial dependency: an employee can insure an employer or vise versa. Partners can insured each other. Key employees can be insured by their employer. So, for example, two cousins who would otherwise not have an insurable interest, jointly own a business and therefore have an insurable interest in the other.
The life insured always needs to consent with their signature and would need to consent by signature to the release and use of their medical information in the underwriting process for underwritten policies.
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Life insurance purchasers are required to have an insurable interest in the life of the insured. Insurable interest generally must exist at policy inception. The underlying principle is that a purchaser must have a reasonable expectation of profit or benefit from the continued life of the insured.
You have no limit on insuring your own life so you can name anyone as the beneficiary of your own policy.
When you take out a policy on the life of another, there are limits on who can own the policy:
1. Family members related by blood or marriage have an insurable interest in each other e.g. Parent/child and child by adoption, siblings, spouse, grandparents/grandchildren, and in some states, engaged couples. There is generally no insurable interest in nieces/nephews, cousins, aunts/uncles, other relative by marriage or stepparents/stepchildren.
2. Creditors have insurable interest in a debtor to the extent of the debt.
3. Business relationships which give rise to a financial dependency: an employee can insure an employer or vise versa. Partners can insured each other. Key employees can be insured by their employer. So, for example, two cousins who would otherwise not have an insurable interest, jointly own a business and therefore have an insurable interest in the other.
The life insured always needs to consent with their signature and would need to consent by signature to the release and use of their medical information in the underwriting process for underwritten policies.