In an Entity Plan, who owns the policies and who is the designated beneficiary?

In an Entity Plan, who owns the policies and who is the designated beneficiary?

• A. The employee owns the policies.
• B. The insurer owns the policies and designates beneficiaries.
• C. The policies are owned by a trust.
• D. The business owns the policies and is the designated beneficiary for each contract participant.

Answer: (D)

In this type of plan, the company is the owner of the life insurance policies and also the designated beneficiary for each covered employee. The employees are the insured, but they do not own the policies or control the death benefits. The business pays the premiums and, if a covered employee dies, the proceeds go to the business to support the plan’s objectives, such as funding benefits or offsetting costs. This is why the business owning the policies and being the beneficiary best fits an Entity Plan. The employee does not own the policy, the insurer doesn’t own it, and a trust isn’t the owner or beneficiary in this setup.

In this type of plan, the company is the owner of the life insurance policies and also the designated beneficiary for each covered employee. The employees are the insured, but they do not own the policies or control the death benefits. The business pays the premiums and, if a covered employee dies, the proceeds go to the business to support the plan’s objectives, such as funding benefits or offsetting costs. This is why the business owning the policies and being the beneficiary best fits an Entity Plan. The employee does not own the policy, the insurer doesn’t own it, and a trust isn’t the owner or beneficiary in this setup.