Insured
Definition
The insured refers to an individual or entity covered under an insurance policy. This policy promises to indemnify, which means to compensate for loss or damage, in specific areas such as property, life, health, and more. The insured is the primary party who benefits from the safety net that the insurance policy provides, ensuring financial support in the event of a covered loss.
Examples
- Life Insurance Policy: John Doe takes out a life insurance policy to ensure that his family is financially protected in the event of his death. Here, John Doe is the insured.
- Auto Insurance Policy: Jane Smith owns a car and purchases an auto insurance policy to cover potential damages from accidents. Jane Smith is the insured under this policy.
- Homeowners Insurance Policy: A homeowner buys homeowners insurance to protect against risks like fire or theft. The homeowner, as the person covered against these risks, is the insured.
Frequently Asked Questions
Q1: What is the difference between the insured and the beneficiary?
A1: The insured is the person covered under the insurance policy, whereas the beneficiary is the person or entity designated to receive the benefits or payout from the policy, especially in the context of life insurance.
Q2: Can there be more than one insured under a single insurance policy?
A2: Yes, some insurance policies can cover multiple insured parties. For example, in a family health insurance plan, multiple family members can be insured individuals.
Q3: Does the insured need to pay premiums?
A3: Generally, the insured or policyholder is responsible for paying premiums to keep the insurance policy active and ensure coverage.
Q4: How is the insured different from the policyholder?
A4: The policyholder is the individual or entity that owns the insurance policy and is responsible for maintaining it, usually by paying premiums. The insured is the person whose interests are covered by the policy. In many cases, the policyholder and the insured can be the same person, but this is not always the case.
Q5: What is indemnity in insurance terms?
A5: Indemnity is a principle in insurance that ensures the insured is compensated for covered losses without making a profit. The aim is to restore the insured to their financial position before the loss occurred.
- Insurance Policy: A contract between the insurer and the insured defining the terms of coverage.
- Premium: The amount paid periodically to the insurer by the insured to maintain coverage.
- Beneficiary: The person or entity entitled to receive the benefits from an insurance policy.
- Claim: A formal request by the insured for compensation for a covered loss.
- Liability: A legal obligation to pay for damages or loss, often covered by insurance.
Online References
Suggested Books for Further Studies
- “Insurance for Dummies” by Jack Hungelmann
- “Risk Management and Insurance” by Scott E. Harrington and Gregory R. Niehaus
- “Principles of Risk Management and Insurance” by George E. Rejda and Michael McNamara
Fundamentals of Insurance: Insurance Basics Quiz
### Who is the primary person protected under an insurance policy?
- [x] The insured
- [ ] The insurer
- [ ] The beneficiary
- [ ] The underwriter
> **Explanation:** The insured is the person whose interests are protected under the terms of the insurance policy.
### Who is typically responsible for paying the premiums in an insurance policy?
- [ ] The insurer
- [ ] The beneficiary
- [ ] The underwriter
- [x] The policyholder
> **Explanation:** The policyholder, which can but doesn't always have to be the insured, is generally the one paying the premiums to keep the policy active.
### In the context of a life insurance policy, who receives the payout upon the death of the insured?
- [ ] The insurer
- [ x] The beneficiary
- [ ] The underwriter
- [ ] The Premium Payer
> **Explanation:** In most life insurance policies, the beneficiary receives the payout when the insured passes away.
### What is the term for the formal request made by the insured for benefits under an insurance policy?
- [x] Claim
- [ ] Premium
- [ ] Quote
- [ ] Policy
> **Explanation:** A claim is a formal request by the insured to the insurance company for compensation for a covered loss.
### What principle ensures that the insured is compensated for covered losses without making a profit?
- [ ] Premium
- [ ] Claim
- [ ] Exclusion
- [x] Indemnity
> **Explanation:** Indemnity ensures that the insured is compensated fairly for covered losses, aiming to restore their financial position to what it was before the loss.
### In an auto insurance policy, who does the term "insured" primarily refer to?
- [x] The car owner or person covered under the policy
- [ ] The person injured in an accident
- [ ] The insurance company issuing the policy
- [ ] The mechanic repairing the car
> **Explanation:** The insured in an auto insurance policy is the car owner or the person whose interests are protected under the policy.
### Can multiple parties be insured under a single insurance policy?
- [x] Yes
- [ ] No
- [ ] Only under health insurance
- [ ] Only under life insurance
> **Explanation:** Multiple parties can be insured under a single insurance policy, such as in family health insurance plans or joint auto insurance policies.
### What is required to maintain an active insurance policy?
- [ ] Filing claims regularly
- [ ] Frequent policy reviews
- [x] Paying premiums
- [ ] Changing beneficiaries annually
> **Explanation:** Paying premiums regularly is required to keep an insurance policy active and ensure continuous coverage.
### What term denotes the insurance company providing coverage?
- [ ] Insured
- [ ] Beneficiary
- [x] Insurer
- [ ] Agent
> **Explanation:** The insurer is the company that provides the insurance coverage as stipulated in the policy.
### What is the primary objective of an insurance policy?
- [ ] To generate profit for the insured
- [ ] To accumulate savings for the insured
- [x] To indemnify against losses
- [ ] To provide investment opportunities
> **Explanation:** The primary objective of an insurance policy is to indemnify against losses, ensuring that the insurance holder can recover from financial setbacks.
