On A Life Insurance Policy, Can The Insured And Policy Owner Be Two Different People? Who Gains What In Death?
Posted September 17, 2009 – 10:22 am in: structured settlements FAQI am concerned that my step-mother has taken out a life insurance policy on my father who is terminally ill and she stands to gain a fortune. They are currently separated. Is it possible for her to name herself or children as the beneficiary– if my father is the insured? If that’s the case, I have my father’s power of attorney. Can I stop this? Can I remove my father from being the insured other than divorce? He may not live that long. She is much younger than my father and we have strong reasons to believe that she married him for financial gain. Please advise me about this situation. Thanks.
Tags: Different, Gains, Insurance, Insured, Life, Owner, People, Policy, What
6 Comments
Yes, the policy owner and the insured life can be two different people, and frequently are.
The ONLY person to gain in death, is the named beneficiary – who can be a third person.
The policy owner is the person who decides who the beneficiary is, and they can change it at any time. They are also the person responsible for paying the bill. Once your father initially gave permission for his wife to take out a policy on him, it’s irrevocable. So no, you can’t stop this, you can’t remove your father from being insured, you can’t keep your step-mother from being policy owner, and you can’t change the beneficiary.
That’s the whole POINT of having the policy owner NOT be the insured – the POLICY OWNER makes the decisions, not the insured’s children. So that if there’s a seperation/divorce, the insured can’t “change their mind”.
You can’t do anything. Sorry. You COULD ask your father, if he’ll let YOU take out a life insurance polciy on him – but if he’s dying, it will probably cost you face value plus 10%. So I don’t know what the point of that would be.
Yes. The owner and the insured can be two different people.
The owner of the policy controls who the beneficiary is. You’re POA has no control of what she does. You can’t stop a thing.
She only needed to show an “insurable interest” when the policy was purchased. It is quite common to see divorced spouses to still collect the proceeds of insurance policies on their ex-spouse.
About all you can do now is make sure that he has a good will and that she doesn’t take any of his money (unless he wants her to take it).
The above comments are all correct. There is nothing you can do. However, if she took it out after he became terminally ill, just know that she probably won’t collect anything. There is a 2 year contestable period on all life insurance policies and if he dies within that time frame, all she will get is her money back and maybe a little interest.
Your concern is a common one. First and foremost… life insurance companies are not permitted to underwrite a policy on the insured without his/her signature. Meaning that you stepmother would not be able to just take out a policy on your father whenever she wanted, he would have had to sign for the policy himself. Secondly, the owner of a life insurance policy has full power of the policy, (for example: taking out a loan against the policy, cash surrendering the policy, or changing beneficiary information) And finally, if you have the power of attorney for your father, it depends on when you believe this suspect policy to have been placed, but the policy would be invalid if you were named POA prior to her opening a policy for your father. I believe this answers all questions. The main objective to understand is that your father would have had to sign off for beneficiary designation as well as understanding the she would be the owner and if you have POA then you override any decisions he has made in that time and would certainly win in any legal battle.
what a bunch of great answers here. you have to remember that if step-mom is paying the premiums, it doesnt matter what you say. if your father let her take out the policy you should not be worried about her gaining any money anyway. maybe she did that so she could recieve some money and that she intends to forfeit some of the estate money so maybe you can recieve some more…i dont no, but if you dad was diagnoised witha disease, before the policy was in place…the company 99.9% of the time will not pay. I’m so sorry for your dad,s health. my thoughts to all of your family.
If she took out the policy under legitimate circumstances as the owner, there is no control that the insured (or insured’s POA) has at this point. Only the policy owner has control the beneficiary, etc.
The only way she could be kept out of it (if she even does have the poilcy), is if she or your father defrauded the insurance company AND he will pass away within the contestability period. If this is the case, the insurance company will perform their own investigation.