Policyholder - The Named Insured on the Policy
In plain language: A policyholder is the person or entity that owns an insurance policy. They're the one who pays the insurance premiums, and in exchange, the insurance provider promises to pay them if certain things go wrong.
Technical definition: The policyholder, also called the aged or named insured, is the party who enters into an insurance contract with the insurer. The policyholder is responsible for paying premiums and is the entity to whom the insurer will pay insurance claims. It could be an individual or a business entity, and is usually identified on the declaration page of policy documents.
Imagine you slip on ice in your driveway, breaking an arm, or an employee gets injured while working. As a policyholder, would your medical, homeowners' or workers' compensation insurance cover these expenses?
TL;DR
What Is Policyholder in Insurance?
A policyholder in insurance is the entity that enters into an insurance agreement with the insurer. This could be an individual or a company that owns an insurance policy, such as a life insurance policy, medical malpractice insurance, or group insurance plan. The policyholder often appears stated in the insurance contract and pays insurance premiums to the insurance provider in exchange for coverage.
As a policyholder, you enter into an agreement where you promise to pay premiums periodically or as a lump sum, and the insurance company agrees to pay loss or damage claims you may incur. This contract is commonly seen in the declarations page of your insurance documents.
A key distinction is that the policyholder is often the 'named insured' but other parties like the additional insured, and beneficiaries are different and do not carry the same rights and responsibilities as the policyholder.
Key Related Terms to Know
Common Questions About Policyholder
What are the rights of a policyholder?
A policyholder has the right to make changes to their policy, file for claims when a covered loss occurs, and receive pay-out for such claims. They also have a right to timely and accurate information regarding their policy. When necessary, they can also cancel their policy.
How is the policyholder different from the insurer?
The policyholder owns the insurance policy and pays premiums for coverage. The insurer, on the other hand, is the insurance provider that agrees to compensate the policyholder for covered losses.
Can another person become a policyholder on the same policy?
Yes, for example in a car insurance policy, you can add another driver, who would also become a policyholder. They would also have rights and responsibilities under the policy.
Who decides the premium amount?
The premium is set by the insurer based on the perceived risk of insuring the policyholder. Risk assessment involves statistical analysis conducted by underwriters.
Policyholder vs. Named Insured
It might seem that the policyholder and the named insured are the same, but there can be a difference although they are often the same person.
Comparison Area | Policyholder | Named Insured
|
Primary use case | Individual or entity that pays the premiums and holds the policy | The person or entity specifically named in the policy document – usually but not always the Policyholder |
Coverage / concept type | Universal – applicable across all types of insurance coverage | Specific – can vary across different types of insurance coverage |
Typical exclusions | Not applicable | May have exclusions based on individual policy terms |
Who is most affected by errors | Both the policyholder and named insured can be impacted | Usually the named insured |
Common mistakes | Misunderstanding the difference between policyholder and named insured | Assuming they have the same rights as the policyholder |
Real Claim Examples Involving Policyholder
Scenario 1: A policyholder purchased a homeowner's insurance coverage. Unfortunately, a fire broke out in his home causing damage. Thanks to being a policyholder, the insurance company covered the damage cost after he filed a claim.
Scenario 2: The owner of a car involved in a road accident was also the policyholder of the car's insurance policy. After documenting the incident and filing a claim, he received compensation to cover repair costs.
Scenario 3: A company was sued by an employee for workplace injury. The company, being a policyholder of a worker's compensation policy, filed a claim with their insurer. The insurance provider covered legal fees & compensation.
Limitations and Common Mistakes
How to Explain Policyholder to Clients
Personal Lines client "Think of the policyholder as the owner of the insurance. That's you. You're the one who pays the premiums and the one who gets the money from the insurance company if there's a covered loss."
Small Business owner “As the business owner, your company is the policyholder. You pay the insurance premiums, and the insurance pays for covered losses that happen within your business."
CFO or Risk Manager "As the policyholder, your corporation enters into an agreement with the insurance provider, pays the premiums, and is the one to receive benefits when valid claims are made."
Insurance terminology can be confusing at times but understanding basic terms like the policyholder can help simplify navigating through the insurance process.