Yes, two individuals can become insured when it comes to life insurance. Generally,in joint insurance policies, two people are insured under the same life insurance plan.
What is the Difference between the Policyholder and Insured?
A life insurance policy refers to a legal agreement between an insurance company (insurer) and the owner of the policy (policyholder). In addition, the policy comprises another party termed as the insured.
The insurer in a policy promises to pay an amount to the beneficiary in the event of the death of an insured person within the policy’s term. This is why you need to understand a policyholder and an insured person before buying an insurance policy.
To avoid confusion regarding these terms, keep reading about policyholder vs. insured.
What is a Policyholder?
As a legal agreement, a life insurance policy involves two entities. While the entity that buys an insurance plan is called a ‘Policyholder’, another party that sells the insurance and provides insurance coverage is called an ‘Insurer’.
Mostly, the breadwinner of a family becomes the ‘policyholder’ and ‘insured’ since buying insurance provides income replacement for their dependents in case they pass away. However, you need to note that the policyholder and insured should not necessarily be the same individual.
What is Insured?
In a life insurance contract, ‘insured’ is an important entity. Like the policyholder, the insured's name is recorded in the insurance policy. The ‘insured’ is an entity or individual who gets financial coverage in an insurance plan.
If the insured person dies, the insurance provider remains bound to compensate for death claims, also known as a death benefit to beneficiaries. In most insurance policies, an insured person and a policyholder are the same, even though it is not mandatory. So, an insured person and a policyholder can be different individuals.
Difference between Policyholder vs. Insured
Differences between a policyholder and an insured are as follows:
The policyholder or policy owner is an individual who plans and buys a policy.
The individual who gets life coverage against risks as per the policy is an insured person.
Only if a policyholder is an insured person, the beneficiary will get the entire sum assured on the death of that insured person (policyholder).
The beneficiary receives the full coverage money on the death of the insured person.
The policyholder decides the ‘nominee’ or beneficiary.
The insured person may be the policyholder or may be decided by a policyholder.
Changing of Policy
The policyholder's name can be changed by producing necessary documents to an insurer like a PAN card etc.
The insured person’s name cannot be changed as premium amount of a policy is decided by the insurer considering factors like age, lifestyle and medical history of the insured person.
What Are the Duties and Responsibilities of an Insured Person?
If an insured person is a policyholder, then there are several duties and responsibilities of that individual.
- The duties of a policyholder (insured person) are:
- Providing every piece of information with honesty
- Completing proposal form on their own
- Furnishing the name of the ‘insured’ ( if a different person) and the ‘nominee’
- Attaching all necessary documents while buying an insurance policy
- Not making any fake declaration
- Making a claim if such circumstances arise as per provisions
- Furnishing the required documents to recover the claim.
- A policyholder (insured) remains responsible for the following:
- Deciding the sum assured and term of coverage
- Paying the premium of a policy as per the due date
- Determining the nominee or beneficiary who receives the sum assured in the event of the death of an insured person
- Making any kind of policy change, like changing beneficiary's name or adding the name of more beneficiaries.
Now, have a look at some fundamental rights of policyholders.
What Are the Rights of a Policyholder?
The insurance policyholder has the right to
- Select an insurance plan they wish to buy from an insurer of their choice without being pressured by any insurance agent.
- Shifting their investments between different funds in a ULIP.
- Reject obtaining anything instead of provisions of an insurance policy.
- Take opinions from various insurance providers and compare them before purchasing an insurance plan.
- Obtaining loans and keeping an insurance policy as collateral in a financial emergency.
- Surrender cash value policy whenever necessary and obtain the principal amount of the insurance plan.
- Add riders or additional benefits to an insurance plan.
- Make complaints to the respective authority regarding the mismanagement of insurers if any dispute arises.
Now you can clearly understand the details about policyholder vs. insured. Having this knowledge will be beneficial when buying an insurance policy. However, remember that the terms and conditions of insurance plans vary from insurer to insurer. Thus, ensure you check them thoroughly after going through the duties and responsibilities of an insured and policyholder's rights as stated above.
Frequently Asked Questions
No. Policyholder and insured need not be the same person in some cases. For instance, if you purchase an insurance policy for one of your family members, then you will be the policyholder, and that person will be the life insured.
Primarily, a policyholder is considered the owner of the policy. In maximum cases, a policyholder and insured are the same individual. However, there are some cases when a policyholder is a beneficiary.
A policyholder is a person who generally gets the eligibility for coverage. In an insurance plan, a policyholder can be a spouse, parent, child, domestic partner, etc.
Important Guides related to Life Insurance
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.