Who are the Parties in a Life Insurance Contract?
There is a difference between the insured and the policyholder in a life insurance contract, although the owner and the insured are usually the same persons.
A contract between an insurer and the insured that if something will happen in the insured person’s life insurance company will pay the claim.
For example, if Sunil buys a policy on his life, he is both the owner and the insured. But if Harsha, his wife, buys a policy on Sunil’s life, she is the owner and he is the insured. The policy owner is the guarantor and he or she will be the person who will pay for the policy. The insured is a participant in the agreement, but not necessarily a party to it.
However, “insurable interest” is required to limit the unrelated party from taking life insurance. Also, most companies allow the Payer and the Owner to be different, e. g., a grandparent paying premiums for a policy on a child, owned by a grandchild [or vice versa].
Life Insurance Contract features
- the person will get a claim
- tax benefit
- sum assured
The beneficiary receives policy proceeds upon the insured’s death. The owner designates the beneficiary, but the beneficiary is not a party to the policy. The owner can change the beneficiary unless the policy has an irrevocable beneficiary designation. With an irrevocable beneficiary, that beneficiary must agree to any beneficiary changes, policy assignments, or cash value borrowing.
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