Insurance Policy Ownership - What Are The Options?
Insurance Policy Ownership - What Are The Options
?It is important, that the ownership of insurance policies is correct, and that the owner/s of policies, are the correct people to receive funds when a claim is made.
Listed below are some pros and cons of ownership for life insurance policies:
Life Insured
This is a common structure, but can be cumbersome for the family on death as no payment is made until probate is granted.
Spouse/Partner of life insured
This is common, and is efficient in respect of death claims as no probate is needed. It can be difficult if couples split however, and one of them cancels the policy over the other's life without that person's knowledge. This could have significant results if that party is unable to reinsure or if the cost of doing so is prohibitivie.
Joint Ownership by Spouses/Partners
This structure provides the same benefits to each party and prevents either owner from giving policy instructions without the others agreement.
Trustee of a Family trust
Enables proceeds to be paid directly to the trustee owners of the policy. This option protects the proceeds from risks the survivor or the deceased's estate may be exposed to. Eg, creditor and family claims. It also provides a mechanism for the controlled transfer of the proceeds to the family.
Children
Mostly avoids probate and divorce issues.
Company
An efficient structure which enables a company to pay off debts or replace people. There is a requirment to separate policies out for specific purposes away from Key Person Contracts and shareholder contracts and debt contracts.
Summary
You should consult with an expert on this subject to ensure you are sorted with regards to correct ownership of yur policies. Your accountant, Solicitor, Trust Expert and Risk Advisor will work together to ensure your policies are set up effectively to deliver the right level of cover to the right person/entity at your time of need.
Make sure your leed advisors have copies of these contracts as well, so your family is not stressed, trying to find the documents at time of claim. Review these contracts on an annual basis, especially any business contracts. Do not become complacent with your insurance policies, be pro-active and ensure you are getting the best out of your policies. They will only work as effectively as the strucure requires.
Glen Hatcher,
Director and Consultant
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