How to Transfer a Life Insurance Policy

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A life insurance policy is a bond on an individual's life. Like any bond, the owner can transfer ownership to any other entity. With life insurance, policy transactions are simple to execute, but the law places a number of restrictions on which transfers are allowable and under what circumstances. These rules and restrictions are called "transfer-for-value-rules," and policy owners should understand them before transferring life insurance policies.

Review transfer-for-value (TFV) rules, which restrict the circumstances under which a life insurance policy pays a tax-free death benefit. A summary of TFV rules is available from websites such as Britannica.com (see the Resources section). The sale or transfer of a life insurance policy may result in a taxable transaction to the original policy owner. It also may result in the eventual taxation of the normally tax-free death benefit to the policy beneficiary. If you do not fully grasp TFV rules, review them with an experienced life insurance agent, accountant or attorney licensed to practice in your state.

Contact your agent or the issuing company that sold you the policy and explain what you would like to do.

Sign the required paperwork. The agent or company may have you sign a policy change form or a transfer of ownership form. You will need to know your policy number as well as identification information of the new owner. You may be required to sign a disclosure form describing TFV rules, as well.

Ensure that you receive confirmation of the change from the insurance company. You should receive a letter or email confirming that the change is complete.

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