Policyholder is a word you hear a lot in the insurance industry. But what exactly does it mean and how does it pertain to you? We answer your questions below.
You might be surprised to learn that the definition of a policyholder is fairly straightforward. A policyholder is the person who purchased the policy and has the authority to exercise the terms in the contract. Essentially, the policyholder owns the policy. In most cases, a policyholder is the insured person. However, they could also be one of the policy’s beneficiaries.
To make things even simpler, the person’s name that appears on the documents signed with the insurance company is the policyholder. It should be noted that not all policyholders are people. A policyholder can also be a business, organization, or other entity. For example, a homeowners association for a condominium complex could be the policyholder of an insurance policy.
No matter who the policyholder is, whether it’s a person, group, or business, they have the right to decide who is covered by the policy, who the beneficiaries of the policy are (if any), and who benefits from the policy’s protection.
Can there be more than one policyholder?
Yes, a policy can have more than one policyholder. In fact, this is often the case with home insurance or renters insurance, where both you and your partner may be listed as policyholders. Similarly, business insurance policies often have more than one policyholder if there are multiple business partners.
Remember that anyone listed as a policyholder has the power to make decisions that affect the policy and list the beneficiaries. Further, being a policyholder does not just mean that you are insured by the policy (and in some cases, this isn’t even the case), but it also means that you have contractual responsibilities to your insurance company.
Is the policyholder always insured?
No, the policyholder is not always insured by the insurance policy. They certainly can be, but they can also choose not to be. A policyholder not being insured is more common than you might think. A policyholder can choose to insure another person, such as their spouse or business partner, and be named a beneficiary of the policy instead.
How many people can a policyholder insure?
The number of people a policyholder can insure ultimately depends on the insurance company. Insurance providers have different rules about this, and may even have different rules between types of policies. For example, if you are the policyholder of a home insurance policy, it is likely that every person who lives in your home will be insured, including yourself.
In such an instance, your policy might insure three, four, or even five people, depending on how many children you have. However, in the case of homeowners insurance policies, some insurance companies won’t insure children over a certain age under the same policy, so it’s important to check this with your insurance provider if you have adult children living at home.
What are the policyholder’s rights and responsibilities?
As mentioned, a policyholder is effectively the owner of the insurance policy. Therefore, they have different rights than those who are simply insured by the policy. Namely, the policyholder is the only person who can make changes to the coverage, whether that means adding additional coverage or changing coverage limits. They are also the only person that can name a beneficiary in the event of an accident or death. The aforementioned rights are held only by the policyholder. Any beneficiaries listed on the policy do not have these rights.
Being a policyholder also comes with several responsibilities, including making payments on time and renewing your current policy before it expires. The policyholder is also the person responsible for providing all necessary documentation and contact information if anything changes (such as a change in address or beneficiaries).
To understand how insurance works, there are a few other policy-related terms to know. Specifically, policies are made up of three components: a policy deductible, policy limit, and policy premium. Having a strong understanding of each of these elements will help you find a policy that suits your needs and budget. Keep reading for an in-depth explanation of policy deductible, policy limit, and policy premium.
The policy deductible is the amount of money that the policyholder must pay out-of-pocket before the insurance company will pay the claim. Depending on your policy, there might be a specific deductible for each claim or one policy per term. The purpose of policy deductibles is to deter policyholders from submitting large amounts of insignificant or small claims. A policy deductible helps keep premiums lower, which reduces how much you pay for insurance. Policyholders can choose what deductible to include with their policies. Generally speaking, the higher the deductible, the lower your premium. Therefore, by choosing a higher deductible, you can pay less for insurance. To learn more about policy deductibles, including the pros and cons of raising yours, contact BrokerLink. One of our insurance advisors will be pleased to explain the ins and outs of deductibles and help you decide on the right deductible for your policy.
The policy limit is the maximum amount that an insurance company will pay under a policy towards an insured loss. Policy limits vary by provider and according to the type of policy you purchased. The maximum limits can be set per loss or per injury, or yearly or over the entire duration of the policy (known as the lifetime maximum). Typically, higher policy limits result in higher premiums. This means the protection is greater but the policy might be more expensive.
The policy premium is simply a fancy name for the cost of the policy. Premiums are typically broken into monthly or quarterly payments, though a policyholder may also choose to pay for their policy annually (which may save them money down the line). Insurance companies consider a wide range of factors when calculating your premium, and each factor weighs these factors differently. Examples of the factors that may be considered when calculating an auto insurance premium are the driver’s age, location, gender, marital status, claims history, driving record, driving habits, and the make, model, and year of the vehicle they drive.
For example, someone who seldom drives, maintains a stellar driving record for several decades, drives a reliable, budget-friendly sedan, and lives in a low-traffic city will likely pay a lower auto insurance premium than a young driver with limited experience who drives a luxury vehicle. You might be surprised to learn that similar policies can have very different premiums depending on the policyholder. The same types of policies can also vary in price for the same policyholder since insurance companies use different risk profiles. This is why shopping around for an insurance policy is so important. A trusted insurance broker from BrokerLink can help you obtain and compare quotes from the leading insurance providers in Canada to ensure you find the best coverage at the lowest rate.
Contact BrokerLink to learn more about policyholders for insurance
Still have questions about policyholders? For over 30 years, BrokerLink has helped Canadians find their insurance policies. Our knowledgeable and friendly insurance advisors are available to answer your questions.
No matter your insurance needs, BrokerLink is here. Get in touch by phone, email, or in person at one of our many locations across Canada. You can also request a free quote on any type of insurance using our online quote tool. Simply answer a few basic questions about yourself and the type of insurance you require, and you'll receive an accurate and competitive quote in minutes. Please note that all BrokerLink quotes are 100% obligation-free.