Life insurance ownership is often overlooked, but it can make a big difference to who receives the money, how quickly it is paid, and how much control you keep.
Your main ownership options include:
• Owning your own policy: You keep full control and can direct the payout through your will. The trade-off is that the payment may go through your estate, which can delay access to funds while probate or estate administration is completed.
• Cross ownership with a spouse or partner: This can help the surviving partner receive funds more quickly. But if your relationship changes and ownership is not updated, the wrong person may stay in control of the policy or receive the benefit.
• Joint ownership: Two people own the policy together. This may help avoid estate delays, but both owners usually need to agree before changes can be made.
• Ownership by children: This may suit some families, but children must generally be old enough to legally own and manage the policy.
• Ownership by someone outside the family: This could be a friend, extended family member, or another trusted person. It can work in the right situation, but it needs careful legal and estate planning.
• Ownership through trustees of a trust: In practice, the trustees own the policy on behalf of the trust. This can support estate planning and may help protect funds for beneficiaries, including minors.
• Ownership by a company: This can be useful for key person cover or business-related debt protection. The policy should match the company’s legal and tax advice.
If ownership is not set up well, a payout may end up being delayed through the estate process. In New Zealand, probate is the High Court process that confirms a valid will and gives the executor authority to deal with the estate. Timing varies, and delays can create real pressure when bills still need to be paid.
The right structure depends on your family, your finances, and who you want protected. Good advice can help you get it right before life changes.
Three smart checks to make today:
• Update your will so it reflects your current wishes.
• Review who owns each life insurance policy and whether that still makes sense.
• Keep a clear record of key financial details so your family can act quickly if needed. This includes usernames and passwords for subscriptions, online accounts and email access.
A trusted insurance adviser can help align your policy ownership with your wider estate plan. A quick review now could save your loved ones stress later.
(Excerpt from a session between members of the Independent Board, facilitated by Michelle Keech, AON Insurance)