Owner's rights

Who owns a health policy

A health insurance policy is a contract, and the policyowner is the party who controls it. Three roles can belong to three different people:

• the policyowner, who applies, pays the premium, and exercises the rights in the contract;
• the insured, whose health or ability to work is the subject of the coverage;
• the beneficiary, who receives any death benefit (for example, from an accidental death

benefit) and has no control over the policy.

Usually the owner and the insured are the same person. When they are not, it is third-party ownership: a parent owns a policy covering a child, or a business owns a disability income policy on a key employee or a disability buy-out policy on a partner.

In group health insurance, the employer or association is the master policyholder and owns the contract. Each covered person receives a certificate of coverage rather than a policy, but still holds some incidents of ownership, such as naming a beneficiary.

The owner's rights

Unless the contract says otherwise, the owner may:

• Choose the coverage: the benefit amounts, deductibles, elimination periods, riders, and

which dependents are covered.

• Name and change the beneficiary. Under the standard change of beneficiary provision, the

owner may change a revocable beneficiary, and may surrender or assign the policy, without the beneficiary's consent.

• Assign the policy or its benefits. An owner can transfer ownership, or assign benefits

so the insurer pays a doctor or hospital directly (an assignment of benefits).

• Choose the premium mode: annual, semiannual, quarterly, or monthly.
• Renew, cancel, or reinstate: keep the policy in force under its renewability terms,

cancel it, return it during the free-look period for a full refund, or apply for reinstatement after a lapse.

• Exercise contract privileges such as converting group coverage to an individual policy

when that right exists.

Florida law confirms that an insured under a group, blanket, or franchise health policy may assign all or part of their incidents of ownership, including the right to name a beneficiary and any right to have an individual policy issued. The assignment vests those rights in the assignee, but the insurer is protected for any payment made or individual policy issued before it receives notice of the assignment (Fla. Stat. § 627.664(1)). The statute says it is codifying rights that already existed (§ 627.664(2)).

Where the rights stop

• Irrevocable beneficiary. If the owner names a beneficiary irrevocably, the owner

cannot change that beneficiary, and generally cannot assign or surrender the policy, without the beneficiary's written consent.

• Who gets paid. Under the payment of claims provision, **death benefits go to the

beneficiary, and all other benefits go to the insured** (or to the insured's estate) unless the owner or insured has assigned them. Owning a policy does not by itself mean collecting its medical or disability benefits.

• The contract governs. Every right exists only as the policy defines it. A right the

contract does not grant cannot be exercised.

On the exam, ask "who controls the contract?" -- that is the owner. The insured is covered; the beneficiary only receives.