Can You Transfer Insurance to Another Person?

Insurance policies are contracts protecting against financial losses. The ability to transfer an insurance policy from one person to another is a common question. The answer varies considerably depending on the type of insurance. Some policies allow ownership or beneficiary changes, while others are personal and require new coverage when circumstances change.

Understanding Insurance “Transfer”

Understanding the fundamental nature of an insurance contract helps clarify why direct “transfer” is not feasible. Insurance policies are built upon the principle of “insurable interest,” meaning the policyholder must stand to suffer a financial loss if the insured event occurs. The insurer also conducts a risk assessment specific to the individual or entity being insured, considering factors such as their history, financial stability, and the nature of the asset being covered.

Consequently, insurance is a personal contract between the insurer and the policyholder. Merely changing the name on a policy is not possible for most insurance types. Instead, what might appear as a “transfer” often involves either a change in policy ownership (common in life insurance) or the necessity for a new policy altogether, particularly when the underlying insured asset or person changes.

Changing Life Insurance Policy Ownership

Life insurance stands out as the primary type of policy where a direct change of ownership, or assignment, is a common practice. The owner of a life insurance policy holds specific rights, including the ability to change beneficiaries, access cash value, or even cancel the policy. Ownership can be held by the insured individual, a trust, a business, or another person. Reasons for changing ownership often include estate planning, gifting the policy, using it as collateral for a loan, or in the context of divorce settlements.

The process for changing ownership involves obtaining and completing a “change of ownership” or “absolute assignment” form directly from the insurance carrier. This form requires details about both the current and new owners, along with the policy number. Both current and new owners may need to sign the document; sometimes the insured’s consent is also required if they are not the policyholder. Once completed, the form must be submitted to the insurance company for review and approval.

Changing ownership carries significant implications. The new owner gains control over all policy decisions, including beneficiary designations and future premium payments. If the original insured continues to pay premiums after the transfer, the Internal Revenue Service might still consider them the true owner for tax purposes. Potential tax considerations, such as gift tax implications or the transfer-for-value rule, may arise, particularly with permanent policies that have a cash value.

Property Insurance and New Owners

When the ownership of a physical asset like a car or a home changes, the related insurance policy generally does not transfer to the new owner. Auto insurance policies are tied to the vehicle and the drivers listed on the policy, reflecting the risk profile of those individuals. If a car is sold, the seller’s auto insurance policy does not automatically extend to the buyer. The new owner is responsible for securing their own auto insurance policy before driving the vehicle. The seller should contact their insurer to cancel or adjust their policy once the sale is complete and the title has been transferred.

Similarly, homeowners and renters insurance policies are specific to the property owner or tenant and their insurable interest in the dwelling and its contents. When a home is sold, the seller’s homeowners policy does not transfer to the buyer. The buyer must obtain their own homeowners insurance policy, often a requirement for mortgage lenders, which should be in place by the closing date. The seller should cancel their policy once the property sale is finalized and they have vacated the premises.

Personal Insurance and New Insureds

For personal insurance types like health insurance or individual liability policies, coverage is specific to the individual or family unit named on the policy. Direct transfer of these policies to an unrelated person is generally not possible. Health insurance policies, whether individual or through an employer, are tailored to the insured person’s health status, age, and other personal factors. If a new person requires health coverage, they must enroll in their own plan, either through an employer, a health insurance marketplace, or a private insurer.

While a policy cannot be transferred to an unrelated individual, an existing family plan might allow for the addition of eligible family members, such as a spouse or dependent children, under qualifying life events. Personal liability or umbrella policies are also individual and not transferable. If someone else needs similar liability protection, they must purchase their own policy based on their unique risk profile. Travel insurance policies are likewise non-transferable and are issued to the traveler(s) for a defined trip.