There are a number of reasons why someone might look to transfer ownership of a life insurance policy. Sometimes a policy holder runs into financial troubles in their future and can no longer afford to keep up with the premium payments. When this happens, it is not uncommon for a policy holder to sell a life insurance policy to a third party or even to the beneficiary. Sometimes a transfer occurs due to the kind hearted nature of a person that simply wishes to gift the policy over. The more common scenario occurs when an individual wishes to transfer a policy over from themselves as individuals and in to a trust. Regardless of the reason for a transfer of ownership involving a life insurance policy, the main point of this article is to emphasize the importance of a proper transfer to ensure a favorable outcome when the policy eventually has a claim filed against it.
The risk policy holders run when transferring ownership is that it may not be done properly. If this occurs, the insurance provider has an easy excuse to fall back on when beneficiaries start filing claims at a future date. If the proper owner of the policy is not named, you can almost guarantee that any claims filed will be erroneous. Imagine a scenario where the previous owner of a policy has passed away but is still listed as the proper owner of the policy. Now the time has passed for the original owner can rectify the situation and file the proper paperwork. Years later, the presumed owner that was not fully aware of a faulty transfer has lived his life and informed his beneficiaries as if all can rely on a life insurance plan. Now, when the second presumed owner dies, there is no one left at all that can testify as to the original transfer if the case were to be disputed. The insurance provider will pocket the premiums and not have to payout to anyone as the beneficiaries will be just as confused.
A denial for an insurance claim surrounding this scenario may come in a number of different forms - for a wrongly named policy holder, for breaching the policy is the transfer was simply not permitted, or even for fraud if the transfer was done to bend the rules a bit. If the insured or owner is wrongly named, the likely scenario is that the wrong beneficiaries coming knocking for the payout. Even if the right ones come, the provider may reject for errors on teh documents. If the transfer was not permitted in the first place, that is an easy denial reason for the provider. This would qualify as a breach of contract in almost all cases. Finally, if the transfer was fraudulent in any manner, it would also be an easy denial for the provider.
If you find yourself in a similar situation, it is not likely that you will be able to sort this problem out with the insurance provider on your own. A situation of this magnitude is best approached with experienced legal help.