Who is considered a third-party owner in a life insurance policy?

In the context of a life insurance policy, a third-party owner is defined as an individual or entity that holds ownership rights to the policy but is not the person whose life is insured by that policy. This means that a third-party owner can make decisions regarding the policy, such as changing beneficiaries, surrendering the policy, or borrowing against its cash value, even though they are not the insured individual.

For example, a parent may purchase a life insurance policy on their child, making them the third-party owner. The child, in this case, is the insured, while the parent holds the ownership rights.

Being a third-party owner is distinct from the roles of the insured individual, the insurance company, or the beneficiary. The insured is the one whose life is covered under the policy, while the insurance company is the entity underwriting the policy and paying out claims. The beneficiary is the person or entity that receives the death benefit upon the insured's passing; they do not have ownership rights over the policy itself unless they are also designated as the owner.