Can you explain what it means to be the owner or holder of a life insurance policy?

A common misconception about life insurance is that the policy owner and the insured person are always the same person. In truth, the owner of the policy could be any number of people other than yourself, even though it is common for someone to be the owner of one or more policies of their own. The owner of the policy, as you'll see, has certain rights to the policy which the insured person, if it is someone else, may not share.

The owner of the life insurance policy is usually the person who initiated the policy and then makes the subsequent premium payments. As the owner, that person can manipulate the policy as it allows, such as withdrawing or borrowing against the cash value in whole life, choosing the investment options for a universal life policy, etc. It is the owner of the policy who is able to enjoy the benefits of a permanent life insurance policy while the insured person is still alive.

In order to purchase a life insurance policy for someone, and therefore the owner of the policy, a person has to show an insurable interest in the person being insured. Examples of an insurable interest include an employer who depends on your expertise to keep the company running smoothly, a wife who might wish to return to her homeland after your death, or children who depend on you to pay the mortgage or provide for a college education. What is important to remember is that even with an insurable inters, you would have to give your signature as agreement for the person or entity to insure you. Simply put, your life cannot be insured by someone else against your will.