Transferability

What Does Transferability Mean?

Transferability refers to a feature of a life insurance policy that enables the transfer of ownership. This means the policyholder can either sell the policy or gift it to another party.

Insuranceopedia Explains Transferability

Transferability can be exercised by either transferring ownership of the policy to another person for free or through a negotiated sale. In the former case, the policyholder may pass the policy to a spouse, business partner, adult child, or someone close to them. By doing so, the policy is no longer part of the insured’s taxable estate upon their death, as they no longer own it. In the latter case, some investors purchase life insurance policies at a discounted rate. These investors become the beneficiary and assume responsibility for paying future premiums. This approach guarantees a return, similar to a bond, although the maturity is uncertain since the insured person may live longer than anticipated. While returns decrease the longer the insured lives, the yield is often high due to the discounted purchase price.