Policyholder

Three roles sit in every IUL policy and PPLI structure: the policyholder, the life insured and the beneficiary. They can be one person or three different parties. The policyholder holds the contract and makes the decisions on it. US policy documents call the same role the policyowner or contract owner.

The policyholder's rights

• Take policy loans and withdrawals, or surrender the policy.
• Choose the index allocation and the death benefit option, within the contract's limits.
• Name and change the beneficiaries, unless a nomination is irrevocable.
• Pay the premiums, or arrange for someone else to pay them.
• Assign the policy, for example as security for a bank loan.

Payor. The person or entity that pays the premiums. It can differ from the policyholder: a company can pay the premiums on a policy held by a family trust. Insurers verify the payor's identity and source of funds.

Joint policyholders (joint owners). Some insurers accept two policyholders holding a policy together, such as a married couple. The policy terms set who holds it after the first death; where the spouse takes over, the policy continues in the survivor's name (on annuities this is called spousal continuation).

Successor. Where the policyholder and the life insured are different people, a contingent policyholder can be named to take over if the policyholder dies first.

In practice

Illustrative structures only.

• Trust-held IUL. The trustees of an offshore trust are the policyholder, the client is the life insured, and the trust is the beneficiary. The trust deed decides who benefits from the death benefit. Trustees sign the application.
• Company-held key person cover. The company is the policyholder and the beneficiary, and a director or key employee is the life insured. Directors sign for the company.
• Personal ownership. The client is the policyholder and the life insured, and names family members as beneficiaries.

In an international IUL

International IUL is usually held by an offshore trust or company, and in some cases by the individual. A trust or company carries on after the life insured dies, so it can hold the policy for decades, receive the death benefit and pay it on under its own terms; see policy held in trust. Where a trust is the policyholder, the trustees take any loans and receive the funds. The policyholder's country of residence, or for a trust the residence of the settlor, trustees and beneficiaries, generally decides how loans, withdrawals and gains are taxed.

In a PPLI structure

In PPLI the client is the policyholder: an individual, a company, a trust or a foundation. The insurer holds legal title to the assets in the segregated account, and the policyholder holds the rights under the contract: the cash value and the death benefit. The policyholder sets the objectives and risk appetite, and an investment manager approved by the insurer makes the investment decisions. A trust or foundation is often the policyholder, separating settlor, structure and beneficiaries for estate planning.

Common questions

Is the policyholder the same as the life insured?

Often, but not always. The policyholder holds the policy; the life insured is the person whose death pays it out. A trust can be the policyholder on the life of the person who set it up.

Can the policyholder and the payor be different?

Yes. A company, a family member or a trust can pay the premiums on a policy held by someone else. The insurer checks the payor's identity and source of funds, and the tax effect of the payments depends on the countries involved.

What happens if the policyholder dies?

If the policyholder is also the life insured, the death benefit is paid to the beneficiaries. If not, the policy passes to the contingent policyholder or, where none is named, through the policyholder's estate. A trust or company stays the policyholder through any change of trustees or directors.

Go deeper: family protection and estate planning and the PPLI guide.