Other than the insured, there are other parties involved in a life insurance contract. The concept of a policy payer and a policy owner are central to the policy contract. One person can perform all three roles. Alternatively, three different persons can have their names associated with one policy. Where ownership rights are concerned, the policy owner is the ultimate arbiter. There can be no change to the insured on a life policy for obvious reasons. However, the owner of the policy could be altered. This provision facilitates the transfer of ownership, enabling life insurance to be sold.
There exist settlement companies who purchase life insurance for a negotiated sum. One requirement is that the cash value on the policy be more than $200,000.00. The other criterion is the age of the insured. The insured should be at least 65 years old. The age provision allows the company to recover their investment within a shorter span of time. The value obtained from the settlement could be greater than the net cash value that would be obtained on surrender. The insurer would be liable to the settlement company once this transaction is completed.
The assignment provision can also facilitate transfer of ownership between individuals. The premise of this is that the insurer bears no responsibility for the validity of an assignment. A new assignment would only take place at the behest of the previous policy owner. To sell a policy to another individual would be to make that individual the full owner of the policy. Assignments that take place for loans are known as conditional assignments. Where a sale of a life policy is completed, an absolute assignment must occur.
Having the ability to sell a policy adds to the flexibility of owning a life policy. However, since insurers have no liability for action until they receive notice of assignment, care must be exercised to ensure that there are no complications. Selling life insurance can be one way to facilitate debt settlement. It is relatively easy to transfer ownership rights on a life insurance policy. In most cases, insurable interest is used to govern assignment. Otherwise, it is incumbent on the previous policy owner to make certain that the transfer is done with the principle of insurable interest in mind. This would safeguard the insured.