In order to evaluate how your life insurance policy should be owned and paid, it is important for you to understand the legal relationship of the parties to a life insurance policy. There are three parties to a life insurance policy: the insured, the owner of the policy, and the beneficiary of the policy.

The insured is you. When you die, the policy pays a death benefit. The owner of the policy is the one who makes all of the decisions about the policy. For instance, the owner owns all of the insurance policy benefits, such as the cash value, if there is any, and can change the beneficiary or make elections about how the policy proceeds will be paid to the beneficiary. Then there is the beneficiary. This is the person or entity that the owner of the policy names to receive the death benefits. Unless you have done some sophisticated planning, you are usually both the owner and the insured of your life insurance policies.