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Things to Know About Owning Life Insurance

June 27, 2018
Our goal is to educate and advise on life insurance options, so you can feel confident in making the right choice, whether that’s through Quotacy or somewhere else. To ensure we provide accurate and trustworthy information, our writers follow strict editorial standards.

Who can get life insurance? What are the related terms of coverage and responsibilities? When it comes to being the owner of a life insurance policy, there are three distinct roles related to one policy you should know about:

  • the owner of the policy,
  • the insured person, and
  • the beneficiary.

When you get life insurance, the policy covers one person’s life, called the insured. The policy owner is the individual who has purchased the coverage on the insured’s life. The beneficiary is the person (or people) who will receive the death benefits (the money that is paid out by the life insurance company) when the insured dies. In this article, Quotacy focuses on the role of the owner of the policy and what it means to get life insurance.

Key Takeaways

The owner of a life insurance policy has control over the policy. The insured and policyowner are often the same person, but not always. The policyowner and beneficiary can also be the same person, but the insured and beneficiary cannot be the same person.

Being a policyowner has its benefits, but also the responsibility to keep the policy inforce, or active. A policyowner should also review the policy occasionally to make sure it still fulfills insurance needs.

Who can get life insurance?

Any person (an adult, not a minor) or legal entity can own life insurance on another person as long as there is insurable interest and mutual consent.

Insurable Interest: Insurable interest exists when the death of one person would negatively financially affect another person.
The most common example of insurable interest is a spousal relationship. If one spouse died, the surviving spouse would likely have trouble continuing to maintain his or her same standard of living (paying the mortgage, raising children, etc.) on one income.

Below are some common scenarios for the owner of the policy and the insured:

  • A husband can get life insurance on his wife or same-sex husband (and vice versa),
  • A parent can get life insurance on a child,
  • A business owner can get life insurance on a key employee,
  • A business co-owner can get life insurance on another co-owner, and
  • You can get life insurance on yourself.

What does it mean to be a policyowner of life insurance?

Life insurance policy ownership means you have full responsibility and control of your policy.

Being the owner of a life insurance policy means:

  • You determine how long your coverage lasts; either the length of your term life policy or lifelong, permanent coverage.
  • You are responsible for paying the policy premiums each month or annually.
  • You may transfer ownership of your policy.
  • You choose the beneficiaries and change them, if necessary.
  • You determine how the beneficiaries receive the death benefit proceeds.
  • You can borrow against or withdraw from policy cash values, if you own permanent insurance.
  • You can surrender or cancel your policy.
  • You may review your policy occasionally to ensure it’s beneficial for you and your family.

When should owners review their life insurance policies?

Below are four common life events when we recommend that you review your life insurance policy:

  1. If you get married or divorced,
  2. If you have a baby or adopt a child,
  3. If you purchase a new home or a second one, and
  4. If you change jobs.

Marriage or Divorce

You would be surprised at how often someone with life insurance dies and ends up leaving their current spouse with nothing because their ex-spouse is still listed as the primary beneficiary of their life insurance policy.

If the policyowner forgets to update his policy to reflect the needed change of beneficiary, there is nothing the should-have-been-beneficiary can do about it.

New Baby or Adopted Child

If you purchased life insurance before having children (or adopting) and only purchased enough to cover your mortgage, but not the costs of raising your child or college tuition, consider purchasing more coverage.

Don’t forget to add any new children to your policy as well. However, if you name your children as beneficiaries and die before they reach legal age, the court will appoint a guardian to handle the proceeds until the child reaches 18 or 21, depending on the state. This is a costly and inconvenient process which is why we don’t recommend listing young children as beneficiaries.

» Learn more: Naming Minors as Beneficiaries: UTMA and UGMA

Instead, you should set up a trust to benefit the child and name the trust as the beneficiary of your life insurance policy or name an adult custodian for the life insurance proceeds under the Uniform Transfers to Minor Act (UTMA).


John Smith and his ex-wife Jane have a 10-year-old child named Lola. When he bought his life insurance policy, John set it up so that 100% of his death benefit would go to Jane, as custodian of Lola, his minor child.

John remarried. He and his new wife Nancy had a baby named George. John decides to update his life insurance policy so that 50% of his death benefit will go to Jane, as custodian of Lola, and 50% of his death benefit will go to Nancy, as custodian of George.

Good job, John. He just saved the moms of his kids a lot of stress and strain.

New Home or Vacation Home

Selling your bachelor pad and buying a house for your growing family? You may need more life insurance coverage to cover your mortgage.

If you’re buying your dream vacation home in the Florida Keys after you retire, you may want to take out another term life insurance policy to cover your extra mortgage payments. This can ensure your spouse or life partner can enjoy the fruits of retirement even if you were to unexpectedly die.

New Job or Contract Work

It’s a nice bonus if your employer offers a group life insurance plan, but when you change jobs, your plan won’t follow your new career move. It’s always a good idea to review your financial portfolio when you get a new job. Not all employers offer life insurance, so if you have a family, we recommend buying an individual life insurance policy to ensure you’re covered.

» Learn more: Do I Need Individual Life Insurance if I Have Group Life Insurance?

If you get a promotion that increases your monthly income substantially, will your family’s lifestyle change? This new salary may mean new cars, private school for the kids, or maybe even a lavish home. You may need to increase your coverage to protect your family’s new standard of living.

See what you’d pay for life insurance

Comparison shop prices on custom coverage amounts from the nation’s top carriers with Quotacy.

Should I own my life insurance policy?

It’s quite common for an individual to be both the owner of the policy and the insured. Being both the policyowner and the insured keeps things pretty simple. Your life is strictly in your hands. There are certain situations, though, when this isn’t the best choice.

If you own your own policy, the proceeds become part of your federal taxable estate if your estate exceeds the exclusion amount. The exclusion amount for 2018 is $11.2 million per person, though this expires on December 31, 2025. State estate taxes differ by state and are in addition to the federal taxes. This includes any property you would leave to heirs as well.

Most Americans will not have this estate tax issue, however.

There is an exception to the estate tax rule. If you own your own life insurance policy and the beneficiary is your spouse, the policy proceeds are not included in your estate via the marital deduction law. You can transfer an unlimited amount of property to your spouse and not get hit with an estate tax.

Cross-ownership between spouses is also common. This means that a husband would be the owner of a policy in which the wife is the insured and vice-versa. The benefit to this is that because you are in charge of the policy on your spouse, you know you are financially protected should the unexpected occur and you have easy access to all the information required to receive the death benefit.

» Learn more: When Should Someone Else Own My Life Insurance?

How can I change the owner of my life insurance policy?

If you are the owner of your policy, you can transfer ownership. All you need to do is fill out a simple form and send it to the life insurance company. You can call the life insurance company directly and ask for this form. If Quotacy is your agency, you can always call us and we will get you the forms you need.

To fill out a change of ownership form, you’ll need the new owner’s following information:

  • First name, middle initial, last name
  • Their relationship to the insured
  • Address
  • Phone number
  • Social Security number

A trust or organization can also own a life insurance policy. With these owners, you may need a few more pieces of information, such as what type of business it is (LLC, Inc., etc.) or the name of the trustees—but it is typically still the same simple change of ownership form.

When transferring ownership of a policy, there are some tax issues to consider. If you change owners to avoid estate taxes, but die within three years of making this change, the policy proceeds may still be included in your estate. When transferring ownership, the IRS also requires you to forfeit all legal rights to the policy. If any incidents of ownership occur by the person who transferred the policy, it may cause the policy to lose certain tax benefits.

The action of changing the owner of your policy may be simple, but check with a financial professional to see if there will be tax consequences. Before changing ownership, call your Quotacy agent to discuss the potential changes you want to make. If you have any further questions about policy ownership or are looking to change the owner of your policy, feel free to contact us. We’re happy to help.  If you don’t have life insurance, get life insurance quotes at Quotacy today.


  1. Lillian Hopkins

    I purchased a life insurance policy on my husband when we were married. He did not want a policy so I am the owner and I paid all the premiums. We have been divorced for over 20 years. Now he is applying for Medicaid. Am I correct that this policy is not an asset that must be reported on that application as I am the owner?

    • Natasha Cornelius, CLU

      Hi Lillian, you are correct. Your ex-husband does not need to include that policy as his asset since you are no longer married and you are the owner.

  2. Alicia

    I have some questions about an insurance policy that my Mom took out on me (her daughter) several years ago. agoago.

  3. Joseph M

    My wife took out whole life policy’s on our 6 children all under 14. Will she always be the owner or will the kids become owner when they become adults? What if my wife dies before the kids become adults?

    • Natasha Cornelius

      Joseph, a few types of children’s whole life insurance policies do automatically transfer ownership to the child once they reach a certain age. Most children’s whole life policies, however, are always owned by the original policyowner (your wife, in this case) unless they decide to transfer ownership to the child. If your wife dies, some policies already state who is to become the owner if the original owner predeceases the insured. If the policy does not list a successor owner, then your wife’s Will would determine who inherits her assets, which would include the life insurance policies on your children. If she does not have a Will at the time of her death, the probate court would determine ownership of these policies.

    • Tammy Byrum

      My aunt had a life insurance policy which had my cousin and I as the beneficiaries. My cousin passed in January and the owner of policy became my mother. We thought she was now the beneficiary but after my aunt’s recent passing we realized that hadn’t been changed. So my mother is owner, my aunt was the insured, I am the beneficiary. Will I need to do a gift tax return… I don’t consider this my money… I will be giving it to my mother who is the owner.

      • Natasha Cornelius

        Hi Tammy – in the eyes of tax law, your mom is gifting you the death benefit. Your mom is the person who needs to share this information with her accountant come tax season and can likely just use some of her lifetime gift exemption amount to cover it.

  4. mark

    my mother has a life insurance policy on me with her the beneficiary. she has dementia and is with hospice. how can we change the beneficiary

    • Natasha Cornelius

      Mark, are you your mother’s power of attorney agent? A properly appointed power of attorney can update beneficiaries of a life insurance policy.

  5. Linda Robinson

    I let my mom get insurance on me. She gave ownership of the policy to my sister. My sister changed the beneficiary and made herself the beneficiary. My children and Husband was the beneficiary. I do not give permission for my sister to have a life insurance policy on me. She has excluded her self from the family. She is not financially responsible for me or my family. Is there anything i can do?

    • Natasha Cornelius

      Hi Linda,

      Ask your sister if she will transfer ownership to you. You can own your own policy and then you will be able to change the beneficiary back to your husband.

  6. Christy

    my mother in law is the owner of a life insurance policy that she took out on her son he is the primary insured she has recently passed can he cash it in and get the cash value on the policy.

    • Natasha Cornelius

      Christy, if your mother-in-law did not name a successive owner on the policy, the policy would transfer according to her will. If she doesn’t have a will, it would transfer according to the state laws in which she lived. Only the owner would have access to the cash value account. When the owner of a policy dies, the insured does not automatically get to take control over it.

  7. Sonia Richardson

    My father is under hospice care and I am trying to get his life insurance policy in order. He borrowed a small amount of money on his policy more than 30 years ago and did not repay it. Now he owes more than the cash value in interest and penalties. The policy is still worth more than the amount owed. The agent is asking me to take ownership of the policy. Can I still take care of his policy under POA (attorney in fact) without transferring ownership? I am concerned that by transferring ownership from my father to me, it could potentially cause me to be responsible for that debt. The agent assures me that when the interest and penalties reach the same amount as the policy value it will automatically cancel the policy. What should I do?

    • Natasha Cornelius


      As attorney-in-fact according to your father’s POA, there is no reason for you to take ownership of the policy as you can manage it as-is. That being said, even if you did decide to transfer ownership to yourself you wouldn’t need to pay these debts out-of-pocket. If the policy loan and accumulated interest grows to be greater than the policy value the policy will lapse, but you wouldn’t need to pay anything out of your own pocket.

  8. Lisa

    My mom owns her insurance policy and I am beneficiary..if she gives me ownership of the policy will I have to pay taxes on the money if she passes away?

    • Natasha Cornelius

      Lisa, in most cases the beneficiaries do not have to pay any taxes on life insurance death benefits. When you become policyowner, double-check that you—and not her estate—are the beneficiary.

      Sometimes a policyowner will arrange for the death benefits to be held by the insurance company upon the death of the insured to earn interest. This interest income passed onto the beneficiary would be taxed. Most policies, however, are set up for the death benefit to be paid out immediately when the claim is sent in. This is then tax-free. If you have any questions, contact the customer service department of your mom’s insurance company.

  9. Ben

    My mother who recently passed away was the owner of a life insurance policy for her son Jack. Is Jack now the owner of the life insurance policy?

    • Natasha Cornelius

      Ben, I’m sorry to hear you recently lost your mother. If she named a contingent owner then the policy would transfer to this person. Without a contingent owner, the policy would transfer according to her will. If she doesn’t have a will, it would transfer according to the state laws in which she lived.

      • Ben

        Thank you for your quick response. She did not name a contingent owner. She made no mention of this in her will. She resided in Texas as does the insured.

  10. Ben

    If my mother who is the current owner an universal life insurance policy that has cash value amount of $25,000 transfers ownership to me (her son and also one of two beneficiaries) what are my tax implications?

    • Jeremy Hallett


      In this case the life insurance is considered an asset and most likely has a transfer value of $25k. There is something called ITR (interpolated terminal reserve) which is commonly used to value life insurance policies for gift tax purposes. If you want to be exact on the value of the gift, you can reach out to the insurance company and ask them to give you the ITR for the policy on your mother. This is normally done for large policies with hundreds of thousands of value. The ITR is always at least the same or higher than the cash value of a policy.

      If you choose to consider the value of the gift to be $25k then your mother needs to use her annual gift exemption of $15k and then $10k of her lifetime gift exemption. She does this with a gift tax return which is due on April 15th of the year following the gift. Doing this will make sure that she doesn’t pay gift tax on the transfer of the policy over to you.

      There is something else called the “Exceptions to the Transfer for Value Rule” which can sometimes make moving ownership of a life insurance policy precarious, meaning that it spoils the policy and makes the insurance proceeds taxable. But, you are fine in this case. One of the exceptions is where the cost basis of the policy carriers over from the transferor to the receiver. Most common scenario for this is when a policy is gifted from a parent to an adult child, which is the case here. So you should be fine.

      Do make sure to file a gift tax return for the transfer of the policy though. They are not difficult to file and will protect your mother if she ever gets audited.

  11. kriss

    can an x wife get my brothers life insurance policy if my mom is the beneficiary on the policy? the x wife is contesting it.

    • Natasha Cornelius

      Kriss, there are a few factors that would come into play here. If your brother and his ex-wife lived in a community-property state then she may be entitled to half of the proceeds. Also, divorce settlements may also have affected what happens to the life insurance policy.

  12. Louise

    Can a child’s life policy (owned by grandma) be placed in a trust, in order to avoid transfer of ownership to said child, upon his 18th (or in some cases 21st or 25th) birthday?

    • Natasha Cornelius


      Grandma is the owner of the policy and has all the control. If she does not want to transfer ownership to the child when he turns age of majority she is not required to. But to answer your question directly, yes, a trust can be created and then the trust can be named the owner of the policy. In the trust grandma can leave instructions for the policy.


    If dad owns and is primary beneficiary on his three handicapped sons’ whole life policies and dad dies, does the face value and/or cash value of the policies become part of dad’s estate? Dad’s sons are young and on Medicaid. Also, can dad deposit money to the cash value of these policies?

    • Natasha Cornelius


      We would advise dad to name a contingent owner. Upon his death, the policy would transfer to this person. Without a contingent owner, the policy would transfer according to his will. If he doesn’t have a will, it would transfer according to state laws.

      With a whole life insurance policy, he likely would not be able to pay additional premium payments to increase the cash value. Whole life insurance policies aren’t typically setup for this. Let us know if you have any more questions.

  14. Yvette Anglon

    My sister purchase a life insurance policy for me my name is on the policy, and my son is the Beneficiary, she now wants ownership over the policy so she can control the money for my son.

    • Natasha Cornelius

      Hi Yvette, you said your sister purchased the policy for you. This means she is likely already the policyowner. You’re named on the policy probably as the Insured. Unless you meant she’s simply paying for the policy’s premiums on your behalf?

  15. Pam

    I own a life policy on my partner in life. He left me about five years ago in debt. I have been struggling ever since to pay his business and personal debts.
    He has received medical advice that he will die within the next twelve months. Is it posdible for him to claim on the policy?

    • Natasha Cornelius

      Pam, if you own the life insurance policy you have control over it. Your partner cannot make a claim even as the insured.

  16. Tricia Wallace

    My husband was required to maintain a life insurance policy in a divorce decree from his ex wife in which their daughter was the beneficiary. My husband did not keep the policy.

    I am the owner of a policy that I took out on my husband in which I pay the premiums. If my husband should pass away, would his expire have a claim on the policy in which I own and pay for?

    • Natasha Cornelius

      Tricia, your husband’s ex-wife will have no claim on a policy you own.

  17. cindi johnson

    my father purchased a flexible premium adjustable life policy for me in 1972 (i was 14 years old). he took a loan out on the policy. He died in 1984 with an outstanding loan still on the policy. In 2012 i was notified that the policy was about to lapse so i paid the loan interest and premium to avoid the tax penalty. I have now received a 1099 from them letting me know that i need to pay tax on $11K+ from the distribution because i let the policy lapse. How can i be held responsible to pay for a distribution on a loan i never took?

    • Natasha Cornelius


      I assume your father at some point transferred ownership of the policy to you since you received the 1099. When policy ownership is transferred by way of a gift, the new owner assumes the same basis position the previous owner (your father) had. The cash basis is essentially the total premiums paid and determines how much money you can take out of a policy without owing taxes. I recommend you call the insurance company the policy is through and ask for a breakdown of your basis in the policy as well as what the basis was when your father transferred it to you. They should be able to explain to you why you are now responsible for the taxes.

  18. Alta

    My father wants to transfer ownership of his life insurance policy over to me.
    Will having ownership of his Life insurance policy affect me in any way as far as taxes is concerned?

    • Natasha Cornelius

      Hi Alta,

      This is a great question. There are a few steps to take to lessen potential negative tax effects. The first is to have your father gift you the policy, versus you purchasing it from him (to avoid an income tax). The second is to make sure that in addition to being the policyowner, you are also the beneficiary (to avoid a gift tax).

      You will also want to contact the insurance company the policy is written through and ask what the value of the policy is. If the value is less than the annual gift exclusion amount ($15,000) then you shouldn’t have any gift tax complications. If the policy value is more than $15,000 then your father will need to claim the additional amounts on his tax returns in order to use some of his lifetime gift exemption (individuals have a lifetime exemption amount of $5.6 million).

  19. Deborah

    What does it mean when there are to people listed as ownership?
    The policy is on my mother which purchased many years ago. My older sister is also listed as ownership. What does this mean and what are her responsibilities as being second ownership?

    • Natasha Cornelius

      Hi Deborah,

      If there are two owners listed on a life insurance policy, both owners have equal responsibilities. If either owner wants to make changes to the policy, both owners must approve the change.

    • Chris

      My mom recently found an insurance policy that my dad had on me his son. He has since passed away, am I entitled to becoming the owner of the policy. Both my parents information is on the policy. But I’m not sure if he made my mom the contingent. What are the chances of me collecting the cash value of the policy

      • Natasha Cornelius

        Chris, have you or your mom called the insurance company to check if this policy still active?

        If your dad purchased the policy on you when you were a young child, there may be a provision that gives you ownership when you turn 18 or 21. Your dad wouldn’t have been required to accept this provision, however, so you need to call the insurance company and ask these questions. He may have named a successive owner on the policy. If he did not, the policy would transfer according to his will. If he doesn’t have a will, it would transfer according to the state laws in which he lived. Only the owner would have access to the cash value account.

  20. Tara

    My father has been pestering me for months to give him my social security number, stating he stppped paying on a life insurance policy (presumably on my life, which was purchased when I was a child, approximately 30 years ago), and he’s going to “lose money” if I don’t give him my SSN. I’ve asked him to send me whatever forms need to be completed, but he insists that I just need to give him the number. I don’t trust him. I don’t understand why he wouldn’t have access to cash value on a policy if he was the policy owner. Is it possible that I am the policy owner, and he’s trying to get money that belongs to me?

    • Jeremy Hallett


      Sometimes life insurance companies ask for the social security number of a beneficiary, but in this case it doesn’t sound like he is making you a beneficiary of a policy on him. He has indicated that it is a policy on you. I have no idea what ‘lose money’ could mean in this scenario or why he would be asking for your SS#. My suggestion is to not give it to him unless he shares a copy of the policy he is referencing and the paperwork he is trying to fill out. Transparency is so important in relationships and it doesn’t sound as though this is a transparent ask. My advice is to sit tight and wait for more information until you feel comfortable sharing (or not sharing).

  21. Brittney

    My father owned a life insurance policy on my mother (divorced), 3 weeks before he died (heavily medicated and on hospice care) there was a change to the ownership and beneficiary of my brother and I, to our half sister Lisa who is no relation to our mother. The insurance company will not provide us with any other information. Is there anyway to contest this or even cancel that policy.

    • Jeremy Hallett

      Hi Brittney,

      I’m sorry to hear about the loss of your father. This change of ownership was obviously done while he was deeply suffering and vulnerable. Unfortunately the insurance company has no way of knowing this or validating it. The only way I know of changing the ownership of the policy back is to take your half-sister to court. A judge will be able to hear the facts of the situation and make a decision whether or not the change was made in bad faith.

    • mary

      My mother purchased a small whole life policy for herself many years ago. She has Altzheimers and is in care facility. We are signing her for Medicaid to pay her facility costs. She can only have $2000 in assets to qualify and this policy has cash value.
      We want mortuary to get money when she passes for final expenses and family to get any left over. Who do we make owner/beneficiary?
      If we make mortuary both, any remaining goes back to Medicare?

      • Natasha Cornelius

        Mary, you can list multiple beneficiaries on a policy. So, you can name the mortuary a beneficiary for the specific amount you’ll owe and then list other beneficiaries for the remaining death benefit proceeds. Regarding the cash value, it will be counted as a “spend down” asset and depending upon the state you live in, the state could go after the beneficiaries for reimbursement following her death. More information can be found at the American Council on Aging website here: How to Spend Down Income and / or Assets to Become Medicaid Eligible

  22. Carolyn

    I’m the owner of life insurance on my son. I’m surrendering the policy. Does he sign as irrevocable beneficiary?

    • Natasha Cornelius

      Hi Carolyn,

      As owner of the policy, you have control over the policy. Irrevocable beneficiaries do have some power, however. They typically have to sign off on changes. Contact your agent or the insurance company of your policy to ask what needs to be done.

      • Stacey

        My mother signed over the ownership to my daughter last year, and my mother have Alzheimer’s.. now my sister and trying to transfer the ownership to her name, even if she have a power of attorney…can she sign my mother name and have it transferred?

        • Natasha Cornelius


          Your daughter is the legal owner of your mother’s life insurance policy. Only she has control over it. Even if your sister is your mother’s POA, she cannot change ownership because the policy is no longer an asset of your mother’s but an asset of your daughter’s now.

          • Angela Hoffman

            Can I as power of attorney of my uncle change the ownership of his life insurance policy when he does not own the policy but he is the insured? We recently changed the ownership to his daughter but regret doing this and would like to change it back to him. Can j do this as his power of attorney or would i have to be her power of attorney to accomplish this??

          • Natasha Cornelius

            Angela, the policyowner is the one with the control. Since ownership was transferred to the daughter, she is now responsible for what happens to the policy. It doesn’t matter if your uncle is the insured.

            She would not need to name you power of attorney in order for a transfer back to her father to occur. As owner of the policy, she has the power to transfer ownership back to her father.

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