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A life insurance policy offers the benefit of covering funeral, debt, and other expenses when the owner of the policy passes away. However, it is important to note that while not all life insurance policies are the same, they are divided for the most part into three different areas or contracts for carrying out the policy itself.

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Understanding the differences is important because it lets you know who can do what when it comes to the ownership and execution of the life insurance policy itself.

The Three Contract Areas of Life Insurance

Owner: The owner is the one who has the rights stipulated in the contract itself. The rights include naming the beneficiary, how the right to the participating dividends is created, and the right to surrender or sell the contract for its cash value. In addition, the owner can transfer their right of ownership to someone else.

Traditional Life Insurance
Understanding the difference between Owner, Insured, and Beneficiary!

The contingent owner of the insurance policy is usually the one who pays the premiums. They are the ones who selected the benefit levels and set the terms for the execution of the policy itself in the case of their passing.

Insured: This is also the life insurance policy owner in most cases, although it can also be the beneficiary. The death of the insured will mean that the benefits of the policy will go to the beneficiary.

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Beneficiary: This is the person, estate, trust, or even a business that will receive the stated benefits of the policy itself. Again, the beneficiary may also be the one who is insured, but not necessarily the owner of the policy itself.

More divisions among the Beneficiaries:

Plus, there are three fundamental divisions of the beneficiary, primary, contingent, and class.

The primary beneficiary is the one who receives the benefits of the insurance policy when the owner passes away.

However, if the primary beneficiary should die before the owner, the proceeds go to the contingent beneficiary. This safeguard is often used by a person who names their spouse as the beneficiary.

If they both should die together in an accident, the contingent beneficiary will receive the benefits. This is often the child or relative of the owner of the policy. Minors can never be named as beneficiaries. But the will can stipulate for a guardian who can hold the benefits until the child reaches adulthood. A class beneficiary is more than one child or group of people who receives equal shares.

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Tips for Purchasing a Life Insurance Policy

Always Choose the Breadwinner: It is best to insure the spouse who makes the most money and pays most of the bills. The benefits should be significant enough to cover the funeral, outstanding debt, and about six months of otherwise lost salary so the family can recover financially.

Do Not Assign the Beneficiary to the Estate: Making the estate the beneficiary means it’s subject to probate, possible taxes, and other costs.

File for Revocable Beneficiary: This allows the owner to change beneficiaries anytime—an important consideration for family members.

Be sure to talk to the life insurance agent or representative before making the final decision so that everyone is covered.


Meet Aaron H., a senior life insurance agent from California with 15+ years of experience. With a major in finance, excellent analytical and communication skills, and a passion for helping clients find personalized solutions, Aaron is a trusted advisor in the industry. He stays up-to-date on the latest trends and developments by attending webinars and workshops, reading industry blogs, and writing informative blog posts on this website. Aaron also has a keen understanding of SEO and online marketing, which he uses to help his clients reach a wider audience and get the coverage they need. He cherishes spending quality time with his wife, two children, and elder parents.