Final answer:
Third-party ownership in life insurance involves a third party receiving benefits upon the insured person's death, impacting costs for insurers.
Explanation:
Third-party ownership in a life insurance contract means that the policyowner is not the insured individual. This arrangement allows a third party to receive the benefits upon the death of the insured person.
It is common in the life settlements industry for healthier, elderly policyholders to transfer their policies to third parties who then pay the premiums and collect the benefits. This practice can impact life insurance costs for insurers.
Businesses buying life insurance policies in third-party ownership scenarios are unlikely to let the policies lapse, ensuring they collect the benefits when the insured individuals pass away.
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