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Life insurance policies are set up with two core components: a policy owner and a life insured. These are usually the same person but it's possible for the policy owner to be someone else, a trust or a corporation. A policy owner has authority over the policy, which includes the ability to amend or cancel it and to select the beneficiaries.  The policy ownerThe policy owner has full control over the policy. They choose who the beneficiary is e.g. who receives life insurance payout. The policy owner is usually also the life insured but they can sometimes be the beneficiary or even a third party like a superfund. The life insuredThis is the person who's life is insured against them passing away. They're the one who goes through the underwriting process, answering questions about their health, occupation and age. When the life insured dies, a payment is made to a beneficiary. The beneficiaryThis is the person who is paid out when the life insured passes away or becomes terminally ill. There can be more than one beneficiary and each beneficiary can receive different amounts – this decision is decided by the policy owner. What is the role of the life insurance owner?The policy owner has control over the life insurance policy, not the life insured. This is because the insurance contract is actually an agreement between the policy owner and the insurance company. The key roles of the policy owner can include:
Life insurance owner vs beneficiary: what's the difference?The policy owner has control over the policy. They're responsible for paying premiums and ensuring the right level of cover remains in place. The owner can also make changes to the policy or even cancel it. At the time the insurance contract is created, the life insurance policy owner must choose the policy's beneficiaries, and also has the authority to change those listed as beneficiaries at a later date. Note: the policy owner can also be the beneficiary – for example, if you purchase a policy on your partner's life (making them the life insured), naming yourself as the person receiving the payout when they die. A beneficiary is a person who receives the life insurance payment. Most people nominate their spouse or a child as their beneficiary, but who you choose is entirely up to you. These types of beneficiaries are known as primary beneficiaries. 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. Who can be the owner of the 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.
What are the benefits and disadvantages of superannuation life insurance ownership?Pros
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What happens if the life insurance owner dies?If the policy owner and the life insured are the same person, 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 or, if no such terms for transfer of ownership are set out, by laws of intestate succession. Updating life insurance policy ownershipIt is not uncommon for people to need to make adjustments to the structure of their life insurance policy as their situation changes. Such changes can include;
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 and resubmitted requesting a change to the policy ownership or beneficiary. It is worth noting that the policy can only be updated by the policy owner.
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What is a third party on a life insurance policy?
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