When and Why You Should Change the Ownership of Your Life Insurance Policy
Life is full of changes—marriage, divorce, business partnerships, or shifts in family responsibilities can all impact who should legally own a life insurance policy. While many people think a life insurance policy is “set it and forget it,” the truth is that ownership changes can be just as important as coverage itself. At Sebastian River Insurance, we help clients understand when and why it may be time to update their policy ownership.
What Does Ownership Mean?
The owner of a life insurance policy has the legal rights to:
Name or change beneficiaries
Make premium payments
Borrow against the policy (for permanent life insurance)
Make other policy changes
The insured—the person whose life is covered—does not always have to be the policy owner. In fact, ownership and beneficiary designations can differ depending on your financial goals, tax planning, or estate strategy.
Common Situations That May Require a Change in Ownership
1. Marriage or Divorce
Getting married may prompt you to transfer ownership to your spouse, especially if the policy is intended to protect your new family. In contrast, divorce may require changing ownership to remove a former spouse from control of the policy or ensure your children remain protected.
2. Business Ownership Changes
Business partners or company-owned policies often require ownership updates if there is a change in partnership, buy-sell agreements, or business structure. This ensures continuity and proper access to funds if the unexpected happens.
3. Estate Planning or Tax Strategies
Sometimes, transferring ownership to a trust or other entity is beneficial for estate planning or tax purposes. A properly structured transfer can help avoid probate, reduce estate taxes, and secure assets for heirs.
4. Gifting a Policy
If you’re giving a policy to a family member—perhaps a grown child or spouse—ownership needs to be legally transferred. This ensures they can manage the policy directly and make decisions about premiums or benefits.
5. Guardianship for Minors
Life insurance for minors is common, but minors can’t legally own a policy. A parent or guardian usually owns the policy until the child reaches the age of majority, at which point ownership can be transferred.
How to Change Ownership
Changing ownership is a formal process that requires completing the insurance company’s transfer forms. Both the current owner and the new owner must sign the paperwork, and the insurer may require additional documentation. It’s important to work with an experienced agent to ensure the transfer is done correctly, avoiding unintended tax consequences or legal complications.
The Sebastian River Insurance Advantage
At Sebastian River Insurance, we don’t just sell life insurance—we help clients navigate complex situations like ownership changes. Our goal is to make sure your policy aligns with your life circumstances, protects your loved ones, and supports your long-term financial goals.
Whether it’s after a life event, a business change, or part of your estate planning strategy, we guide you through every step of the process to make it smooth and worry-free.
Conclusion
Life changes, and your life insurance should be flexible enough to reflect those changes. Updating the ownership of your policy ensures the right person has control, your beneficiaries are protected, and your coverage continues to meet your goals.
Don’t wait for life to force a complicated situation—review your policy ownership today with Sebastian River Insurance and secure your family’s financial future.
