Policy Holder

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Definition

A policyholder is the entity or individual who owns the insurance policy. Under an insurance policy, the premium is paid by the policyholder. Upon maturity or a claim the policyholder/ nominees receive the benefits..

Description:

When your father funds you to buy a laptop, he is responsible for paying for the laptop instalments. But if you buy a laptop from your salary after your first job, you are liable to pay for it. The ownership of the laptop changes in both cases.

Ownership comes by making the payments for an asset. In case of life insurance, a policyholder can either buy the policy for self or another person. A policyholder can own the policy but may not be the insured always. So, if the insured dies, the claim will be payable to the declared nominee. But if the policyholder dies who is not the insured under the policy, no claim will be paid.

A policyholder has the full power to adjust the coverage, appoint a nominee, change a nominee, etc. Therefore, the onus of selecting the adequate sum assured and dealing with claims also lies with the policyholder.

Generally, the premium under the insurance policy is paid by the earning family member who can afford to pay it till the end of the policy term. So majorly in Indian families the sole bread winner plays the role of the policyholder for a life insurance.

Example:

Mohita purchased a term plan for herself as she was the only breadwinner in the family. She paid a premium of Rs.7700/- annually. There were four family members who were dependent on her. In this case, Mohita is the policyholder and the life insured, both. She paid the premium. Hence, she became the policyholder and she got herself covered which is why she was the life insured.

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