Knowing how to distinguish the policyholder from the insured person and the beneficiary is essential to properly understand insurance contracts before signing them and to know the responsibilities assumed by each party. Depending on the context, these roles may all fall on the same person, but they may also correspond to three different people. Below we explain them in detail, together with practical examples.
What Roles Are Involved When Signing an Insurance Policy?
When taking out an insurance policy, there are three main parties:
- the insured person,
- the beneficiary,
- and the policyholder.
Depending on the circumstances, they may be companies, individuals or even objects, and they must always be reflected and identified in the contract.
The Insured Person
The first role is the subject of the contract. It may be a person or an object, and its conditions or circumstances will determine what is considered a claim. Cars, homes and even investments can be insured, but so can people.
The Beneficiary
The beneficiary is the person who, if the agreed conditions are met, receives the indemnity. They may be related to the other parties or be completely independent.
The Policyholder
Finally, policyholders are the people who sign the insurance contract. This means their role is to accept the conditions and, consequently, make the payments. Their duties also include defining the other two roles: what is insured and who will receive the compensation. Another important obligation is to keep the insurance in force by ensuring payments are up to date.
Policyholders That Are Legal Entities
It is very common to find situations where the party signing the insurance is a company.
For example, if an individual negotiates life insurance as part of their benefits package, the responsibilities are separated:
- The company pays the employee’s life insurance and assumes the role of policyholder. It is responsible for arranging the product, negotiating conditions with the insurer, choosing the value of the policy, and so on.
- However, it will not be involved beyond this, because the insured person is the employee and the beneficiaries are the ones who would receive the indemnity in the event of a claim.
Policyholders That Are Individuals
When a self-employed worker takes out a liability policy, they assume the same responsibilities for signing the contract and negotiating the conditions, but in this case as an individual. Even if they are self-employed and legally required to have insurance in order to carry out their economic activity, at the time of signing they assume an individual responsibility.
As we have seen, the figure of the policyholder plays a very important role when entering into the contract. Their role is essential in defining the policy conditions and in making payments.