Adding their loved ones as 'policy owners' is something that people often overlook. But it can be very important depending on your situation, and here's why.
Are you the sole owner of the policy?
When you take out life insurance on yourself, if you don't nominate someone else, you're automatically the sole policy owner. In this case, you'll need a Will to ensure that the life cover payment is distributed as you want it to be. For example, you may like the proceeds to be split between your partner and children, or to support a charity of your choice.
The drawback of this approach is that it may take a while before your loved ones get the payment: before payments from estates can be made, a Will almost always needs to go through the administration and probate process, which can take several months.
But there are other options you can consider, depending on your circumstances, including joint policy ownership.
Joint policy ownership
One way to avoid delays and costs is to list your partner (or another person that you want to benefit from the claim payment) as the policy owner as well. If you opt for a jointly-owned policy, since both of you will have control of the policy, any changes you want to make will have to be authorised by both owners.
The key advantage of this option is that your life insurance payment will go directly to the other policy owner rather than getting distributed via your will, which can avoid delays in getting the claim payment just when it is needed. However, this ownership structure may not be right for your situation and comes with a couple of potential drawbacks as well, namely:
- The joint policy owner may refuse to authorise changes or a cancellation of the policy in the future, meaning they may benefit from a claim payment even if you no longer want them to;
- You can't choose to leave part of the proceeds to a specific cause or other family members, like your children.
Generally speaking, a policy owner needs to be at least 16, and some life insurance companies don't enable you to have beneficiaries named on the policy.
How we can help you
As your life changes, so may your insurance needs. And that's why it's crucial to check the ownership structure as part of your regular insurance reviews.
If it's time to check who owns your life insurance policy, and consider whether it needs to be changed, get in touch with our friendly advisers at LifeDirect. You can call us on 0800 800 400 or message us here.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.