Definition
Policyholder: A policyholder is the individual or other entity who owns an insurance policy. They have the contractual rights to receive benefits from the policy and to make decisions regarding the policy coverage, such as renewing or canceling the policy. The term is synonymous with “policyowner.”
Examples
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Life Insurance Policyholder: John purchases a life insurance policy to ensure his family will have financial support in the event of his death. As the policyholder, John owns the policy and has the right to name beneficiaries and update them as needed.
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Auto Insurance Policyholder: Sarah owns an auto insurance policy for her car. As the policyholder, she pays premiums and can file claims in case of an accident.
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Health Insurance Policyholder: A small business obtains a health insurance policy for its employees. The business, as the entity holding the policy, is the policyholder and responsible for managing the policy terms and payments.
Frequently Asked Questions
1. Can a policyholder be different from the insured person?
Yes, a policyholder can be different from the insured individual. For instance, a parent can be the policyholder of a life insurance policy while the insured person is their child.
2. What are the responsibilities of a policyholder?
A policyholder is responsible for paying premiums on the policy, keeping the policy active, and informing the insurance company of any significant changes (e.g., address, beneficiaries).
3. Can a policyholder change the beneficiaries of an insurance policy?
Yes, the policyholder has the authority to change the designated beneficiaries of the insurance policy unless the beneficiary designation is irrevocable.
4. What happens if the policyholder dies?
Generally, if the policyholder dies, the named beneficiaries will receive the policy benefits. In some cases, a contingent policyholder may take over the ownership of the policy.
- Beneficiary: The person or entity designated by the policyholder to receive the policy benefits upon the occurrence of the insured event.
- Premium: The amount paid by the policyholder to the insurance company in exchange for coverage.
- Coverage: The specific protections provided by an insurance policy as stipulated in the terms and conditions.
- Claim: A request made by the policyholder or beneficiary for the payment of benefits provided under the insurance policy.
- Underwriting: The process by which an insurance company evaluates the risk of insuring a policyholder and determines the terms of coverage.
Online References
Suggested Books
- Insurance for Dummies by Jack Hungelmann
- The Tools and Techniques of Life Insurance Planning by Stephan R. Leimberg, CLU, ChFC
- Insurance 101: Principles and Practices by George E. Rejda
- Introduction to Risk Management and Insurance by Mark S. Dorfman
Fundamentals of Policyholder: Insurance Basics Quiz
### Who is responsible for paying the premiums of an insurance policy?
- [x] The policyholder
- [ ] The beneficiary
- [ ] The insured person
- [ ] The insurance company
> **Explanation:** The policyholder is responsible for paying the premiums necessary to keep the insurance policy active.
### Can a policyholder change the designated beneficiaries of an insurance policy?
- [x] Yes, unless the beneficiary designation is irrevocable.
- [ ] No, the beneficiary cannot be changed once set.
- [ ] Only with the insurance company's permission.
- [ ] Only in the first year of the policy.
> **Explanation:** A policyholder can change who the beneficiaries are unless they are irrevocably designated, meaning the change cannot be made without the beneficiary’s consent.
### What term is synonymous with policyholder?
- [ ] Insured person
- [x] Policyowner
- [ ] Beneficiary
- [ ] Claimant
> **Explanation:** The term "policyowner" is synonymous with "policyholder."
### What happens if the policyholder of a life insurance policy dies?
- [ ] The insurance company keeps the benefits.
- [x] The named beneficiaries will receive the policy benefits.
- [ ] The next of kin automatically becomes the new policyholder.
- [ ] The policy is cancelled immediately.
> **Explanation:** If the policyholder of a life insurance policy dies, the designated beneficiaries will receive the policy benefits as agreed upon in the policy.
### Who has the authority to make changes to an insurance policy?
- [ ] Only the insurance company
- [x] The policyholder
- [ ] The insured person
- [ ] The beneficiaries
> **Explanation:** The policyholder has the authority to make changes to the insurance policy, including premium adjustments, changes to beneficiaries, or coverage updates.
### Who receives the benefits from an insurance policy upon the occurrence of an insured event?
- [ ] The policyholder
- [ ] The insurance company
- [x] The beneficiary
- [ ] The underwriting department
> **Explanation:** The beneficiary receives the benefits from an insurance policy upon the occurrence of an insured event.
### In the event of an insured person's death, which entity is typically responsible for disbursing the life insurance benefits?
- [ ] The government
- [ ] The policyholder
- [ ] The insured person
- [x] The insurance company
> **Explanation:** The insurance company is responsible for disbursing the life insurance benefits to the beneficiaries when the insured person dies.
### Can a policyholder and the insured person be the same individual?
- [x] Yes, they can be the same individual.
- [ ] No, they must always be different entities.
- [ ] Only in cases of auto insurance.
- [ ] Only if the policy specifies so.
> **Explanation:** The policyholder and the insured person can be the same individual, though they do not necessarily have to be.
### What must a policyholder do to keep an insurance policy active?
- [ ] Update the policy every month.
- [ ] Designate new beneficiaries yearly.
- [x] Pay the policy premiums.
- [ ] Provide regular health updates.
> **Explanation:** To keep an insurance policy active, the policyholder must pay the required premiums.
### Who typically evaluates the risk of insuring a new policyholder?
- [ ] The policyholder
- [ ] The beneficiary
- [x] The underwriting department
- [ ] The government
> **Explanation:** The underwriting department of the insurance company typically evaluates the risk of insuring a new policyholder.
Thank you for enriching your understanding of the insurance industry’s terminology and for advancing your knowledge through our informative quiz!
