Understanding The Parties Listed On An Insurance Policy
Posted on: 13 July 2020
Every person and business involved in an insurance policy is listed within the policy's paperwork, and technical terms are used to describe each party's relationship to the policy. Here are some of the terms you might find in an insurance policy's papers and who each term refers to.
Policyholder
The policyholder is the person or business that actually owns the insurance policy. This is almost always whoever bought the insurance policy and paid its premiums, although you technically can buy an insurance policy and give it to someone else.
Insured
The insured is the person or business who is covered by the policy if something happens.
The insured is generally the same party as the policyholder in most property and casualty insurance policies, although sometimes a policy will list all family members as insureds and not as policyholders. For example, a homeowners policy that you and a spouse buy might only have you two listed as policyholders. You two and any children you have might be listed under insureds, though.
With life insurance policies, it's sometimes more common to see different parties listed as the policyholder and the insured.
For instance, a business might purchase a life insurance policy for a key person. Should this person pass away, the policy would pay investors who wouldn't see a return anymore if the business had to shut down. In this situation, the business would be the policyholder and the key person would be the insured.
Beneficiaries
Beneficiaries are the people who receive a payment from a life insurance policy. They may be the same as the policyholder or different, but they can't be the same as the insured since that's the person whose life is covered by the policy. If the insured passes away, they can't receive a death benefit payment from the policy.
Beneficiaries are typically not found in property and casualty policies. Instead, these policies usually pay the policyholder.
Additional Insured
An additional insured is another party that's added onto a policy's coverage for a temporary period. The policy treats them as another insured party.
For instance, a business might add an additional insured if it brings in an outside vendor for a special event on the business's property. In this situation, the policy would cover a claim against either the business or the vendor.
Insurer
The insurer is the company that actually underwrites the insurance policy and makes a payment if there's a covered claim. This is also the company that receives the premium payments.
If you purchase insurance through an agent or broker, the insurance company that underwrites the policy is the insurer. The agent or broker is merely a facilitator who helps with the transaction.
Contact an insurance agency to learn more.
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