A life insurance policy is a type of financial contract between an individual person and the insurer. Though many types of life insurance policies and coverage exist, in general, a life insurance policy obligates an insurance company to pay the beneficiaries of the policy a certain amount of money when the policyholder dies or becomes terminally ill. While the policy owner is still alive and in good health, she owns the policy and is responsible for paying its premiums. However, if the policy owner desires, she may transfer ownership and responsibility of the policy to another person without losing the equity she has built.
Choose the new owner of your life insurance policy. Because life insurance companies distribute benefits after your death, the person you choose should be someone you will likely outlive, such as a younger relative. The owner of the policy should be an adult who is mentally sound. Transferring ownership to a spouse has many tax benefits, because any income your spouse receives after your death has no tax liability. In contrast, if you transfer your insurance to a child, loved one or other beneficiary, they will have to pay taxes on any income they receive from the policy.
Notify your insurance company that you intend to transfer your life insurance policy to a new owner. The company will likely begin the transfer process by sending you the forms it requires to complete the transfer of ownership.
Complete the forms your insurance company sends you. Include full contact information for you and the new owner of the policy. You may have to seek the services of a notary public.
Set up a meeting with a representative from your insurance company. She will help you finalize the paperwork for transferring the policy to its new owner. You will need to go to the meeting with the new owner, and you will both have to bring at least two forms of identification -- at least one should be a photo ID.
You can transfer ownership of your life insurance policy to an adult child only. Minor children may not own other people's adult term life insurance policies; however, they may remain as beneficiaries on the policy.
There is a potential disadvantage of transferring your insurance policy to your spouse: Once you transfer the policy, you can't make any changes on it, including its beneficiary. If your spouse is your policy's beneficiary and you divorce after you finalize the transfer of ownership, your spouse will nevertheless remain its beneficiary for the life of the policy.