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Who owns a life insurance policy?

Who owns a life insurance policy?

Setting up your life insurance cover or reviewing your existing cover? One important aspect to consider is the ownership of the policy.

What does it mean to own a policy?

Policy ownership gives you control of the policy and the right to deal with it. You can control the policy during its life, this could include changing the contact details, cover reduction, premium payments and so forth. You also have control of the policy at claim time which is when the funds are received by the policy owner.

For most people, the most common triggers for getting life insurance are children and debt, such as a mortgage. The important thing is to set up the ownership structure in a way that ensures that in the unfortunate event of your death and a claim arising, the funds of the policy end up where you want them to.

There is no standard or straight forward rule to follow when selecting the ownership of your life insurance policy, this is because the structure needs to reflect your individual circumstances. However, most people choose one of two options, which we'll look at below.

Sole policy ownership - You will have the option to be the sole owner of your policy. In this case, in the event of your death, the funds are paid into your estate and distributed in accordance with the law and the stipulations of your will if you have one.

Joint policy ownership - In this case, you and another person (usually a partner) will own and have control of the policy. During the life of the policy any changes that are made to your policy will require signed authorisation from both of you. In the event of your death, the funds bypass your estate and go directly to the remaining policy owner.

Can a child own a policy?

A good question that we get asked at LifeDirect is whether a child can own their own policy? The policy owner needs to be at least 16 years old, and most insurers won’t allow you to have beneficiaries listed on the policy. To make sure funds reach your loved ones, you're best to make sure your will is up to date and lists where you'd like the funds to go. In some cases a trust could be involved (with the trustees owning the policy). We recommend getting advice from a lawyer to make sure your will (or trust) is sorted and set up how you want it.

As your circumstances change, it's important to update your policy ownership to reflect those changes. Changing ownership is usually very simple - and at LifeDirect, we’re here to assist you with making this change. If you’re a LifeDirect customer, you can log into your MyLifeDirect, from there you can request a policy ownership change. Otherwise you can head over to the LifeDirect homepage and start your own free quote, or have a chat with us using the livechat on the website. Alternatively, you can give one of our sales consultants a bell on 0800 800 400.

About the author

At LifeDirect, our core belief is that Kiwis deserve clear and straightforward choices when buying insurance. We hope this little bit of information will help you to make smarter decisions with insurance.  

If you want to get in touch, our Customer Care team based in Wellington is here to take the pain out of setting up your insurance.