How Does Insurance Policy Owner Differ From Beneficiary?
The insurance policy owner differs from the insurance policy beneficiary in a number of ways that are important for both parties to know and fully understand. Find out about how an insurance policy owner differs from the beneficiary of that same policy with help from an assistant professor of insurance at The American College in this free video clip.
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Hello. I'm Kevin Lynch. Professor of Insurance at The American College in Bryn Mawr, Pennsylvania. Right now we're going to answer the question: How does the owner of a life insurance policy differ from the beneficiary of the policy? Legally speaking there are only two required parties to a life insurance contract. They are the company and the policy owner. Now many times there are a number of other parties involved in the policy. These might include the insured, the person whose life is insured; the beneficiary, the person who will receive the proceeds of the policy in the event that the insured person dies. Of all the parties mentioned to a life insurance contract, only the owner has any legal rights in the policy. These rights include the right to name a beneficiary or beneficiaries to receive the policy proceeds upon the death of the insured person. There is no requirement for the owner to disclose to the beneficiary, the fact that he or she is a beneficiary. And unless there is a court order requiring the owner to name a specific beneficiary, such as in the case of a divorce, the owner can name anyone they desire as the beneficiary to their policy. There are distinct types of beneficiaries. The first is a revocable beneficiary, this is an ordinary beneficiary with no special rights in the policy. As a matter of fact the owner of the policy can change a revocable beneficiary at will. The other type of beneficiary is an irrevocable beneficiary. This beneficiary cannot be removed from the policy without their permission. In addition they have proved certain aspects of legal rights in the policy because the owner cannot do anything for the policy that might diminish the value of the policy for the irrevocable beneficiary. One other thing of note to mention is that beneficiaries can be either natural persons, meaning human beings, or legal entities, such as charities, institutions such as colleges, or other organizations of those types. I'm Kevin Lynch, professor of insurance at The American College in Bryn Mawr, Pennsylvania. We've been talking about how the owner of a life insurance policy differs from the beneficiaries. For more information go to www.theamericancollege.edu. Thank you.