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6.4 Third Party Ownership

A third-party ownership policy is a life insurance policy in which one person owns the policy on the life of another individual. In this arrangement, three parties are involved: the policyowner, the insured, and the insurer.

Common examples of third-party ownership include:

  • A husband purchasing a policy on his wife
  • A parent purchasing a policy on a child
  • A business purchasing a policy on a key employee
  • One business partner purchasing a policy on another partner