Parties to contract

There are three parties in a life insurance transaction; the insurer, the insured, and the owner of the policy (policyholder), although the owner and the insured are often the same person. For example, if Qwanda buys a policy on his own life, he is both the owner and the insured. But if Wanda, his wife, buys a policy on Qwanda's life, she is the owner and he is the insured. The owner of the policy is called the grantee (he or she will be the person who will pay for the policy).

Another important person involved is the beneficiary. The beneficiary is the person or persons who will receive the policy proceeds upon the death of the insured. The beneficiary is not a party to the policy, but is designated by the owner, who may change the beneficiary unless the policy has an irrevocable beneficiary designation. With an irrevocable beneficiary, that beneficiary must agree to changes in beneficiary, policy assignment, or borrowing of cash value.