WHO CAN BE A POLICY
OWNER AND WHAT IT MEANS
At claim time, who do you want the benefit to be paid to? Is it you, your parents, spouse, partner, or even the Trustees of your family trust? Who can be the owner of the life insurance policy? There are several ownership options to consider when it comes to your insurance policy.
Self-owned policies are perhaps the most common form of life insurance and are the easiest to administer. This obviously means that the life insured owns the policy and therefore has full control over their own life insurance. Changes to the policy can all be taken care of by the one person, while the policy is simple to administer if changes occur to your life circumstances—for example you get divorced.
Also known as third-party ownership, this structure means that someone other than you will own your policy. This can be quite a common approach for married couples where each spouse owns their partner’s policy. Cross ownership does have its advantages, especially for those who rely on someone else (e.g. their spouse) for a stream of income. However, if your marriage breaks down and you have cross owned life insurance policies, difficulties may arise.
This is another ownership structure you can consider if you’re married or in a relationship. 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, divorce or relationship breakdown can result in difficulties with this type of ownership.
Insurance policies can also be owned by a corporate entity. Businesses may take out key person insurance on an employee, and this may let them claim a tax deduction for the premium and also cover the loss of revenue resulting from the loss of a key person. Alternatively, policies can be owned by the Trustees of a Family Trust – not the trust itself.
You can also own a life insurance policy through an employer’s superannuation scheme. Because super schemes can offer certain insurance policies purchased at group rates rather than individual rates, these policies will be offered at very competitive prices. No medical exams are required for you to take out basic cover and often include disability covers.