What is termed as when someone other than the insured applies for an insurance policy?

When someone other than the insured applies for an insurance policy, it is referred to as third party ownership. This situation often arises in cases where a parent applies for a policy on a child's life, or an employer takes a policy on an employee. The key aspect of third party ownership is that the person applying for the insurance (the policy owner) has an insurable interest in the life of the insured, even though they are not the person whose life is covered by the policy.

Understanding third party ownership is crucial in the insurance field because it allows for the dynamics of ownership and beneficiary designations to be clarified, facilitating various financial planning or risk management strategies. This ownership aspect differentiates it from joint ownership, where two or more individuals might possess shared rights to the policy, and shared ownership, which is not a recognized term in insurance. Beneficial ownership does not fit within this context since it refers to who benefits from the policy rather than who applies for it.