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A matter of life or death?

The ownership structure of your personal insurance policies is more important than many realise. It’s critical that the life insurance policy ownership structure is matched to the circumstances of the life insured and policy owner(s).

Don’t be caught short!

There are a number of life insurance policy ownership structures, all with their advantages and disadvantages. Irrespective of the policy ownership structure chosen, it is essential to have an updated and unambiguous will.

This article focuses on two common policy ownership options: sole and joint insurance policy ownership.

Sole policy ownership

In this situation, the life insured is also the policy owner. In case of death the policy will be paid to the estate and distributed in accordance with your will, if you have one. This can mean delays and problems if the family needs to access the money immediately to pay for daily expenses or funeral costs. The policy will be locked up, pending the granting of probate, after death.

Joint policy ownership

In this case, you and another person (usually your partner) will jointly own and have control of the policy. During the life of the policy, any changes that are made to your policy will require signed authorisation from both of you. In the event of your death, the funds bypass your estate and go directly to the remaining policy owner. This therefore avoids the insurance funds becoming part of the deceased’s estate which creates delays in accessing the funds and, in turn, can cause mental and financial stress and anxiety for the surviving family. This type of ownership, however, might create problems when a marriage or partnership breaks up, as both parties will need to agree to split the policy.

Review your life insurance cover

It’s wise to go discuss your life insurance cover periodically with a trusted adviser to make sure that you have the life insurance in place that suits your current circumstances.

Business insurance policies

Next month, we will look at the policy ownership structures for businesses as well as the importance of having Enduring Powers of Attorney to ensure that your assets and personal welfare will be properly managed on a temporary or permanent basis by someone you trust, if you become unable to do so.