Who Is the Policyholder on a Life Insurance Policy?

Wondering about the role and responsibilities of a life insurance policyholder? This will help answer your questions.

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Updated May 13, 2024
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Life insurance is one of the most important types of insurance because it can help protect your family if something happens to you. But it can be confusing to understand how life insurance works. After all, if you purchase a policy, you won't be the person who receives payment if you die.

To make an informed choice about your insurance coverage, it’s important to understand who the policyholder is and what their responsibilities are. This guide will help you make sense of this important role.

In this article

What is a policyholder?

A policyholder is a person who enters into a contract with an insurance company. The policyholder pays the insurance premiums and any deductibles and typically decides what coverage to apply for.

Policyholders exist on all types of insurance contracts, not just life insurance.

  • For life insurance: The policyholder is the person who purchases insurance coverage. It is usually the person whose life is insured by the policy, but that's not always the case.
  • For auto insurance: The policyholder is the individual that purchased the policy. Usually, the policyholder is covered by the auto insurance coverage. Other people may also be covered because of their relationship with the policyholder. For example, if you buy car insurance, your spouse and other household members would also typically be covered if they drove your vehicle, but only you would be the policyholder.
  • For homeowners insurance: The homeowner who purchased the home insurance policy is the policyholder. The policy typically covers that person's home and possessions.
  • For renters insurance: The renter who bought the policy is the policyholder. The renter's personal possessions are generally covered.
  • For health insurance: The policyholder owns the insurance policy. Policyholders are generally covered by the health insurance they purchase and can add dependents, such as spouses or children, to their health care coverage.

Although a policyholder may not be the only person who is covered, depending on the type of insurance product, it might be the policyholder's responsibility to decide all the people who should be given coverage. For instance, with auto insurance, the policyholder typically shares the names of other drivers in the family who should also be covered by the policy.

What does it mean to be a life insurance policyholder?

Policyholders have certain legal responsibilities when they enter insurance contracts. Their obligations can vary depending on the type of policy. For life insurance, the policyholder decides what type and how much coverage to apply for. For example, they can determine if they want a whole life or term life policy and how large the death benefit should be.

The policyholder is usually the person whose life is insured. However, it's possible, in some circumstances, to buy life insurance coverage for another person as long as you have an "insurable interest" in the insured (the person whose life is covered).

For example, you might get life insurance for your spouse if your spouse agrees and you can prove you'd be financially damaged if your spouse dies. In that case, you'd be the policyholder and your spouse would be the insured.

How the life insurance underwriting process works

When an individual applies for coverage, they need to make certain the insurer is given accurate details about the individual whose life is insured. That's because insurance providers want to assess their risk to determine how likely it is that the policy will have to pay out a death benefit. Insurance companies use a process called underwriting to conduct this risk assessment.

During the underwriting process, insurance companies ask for a lot of information about the would-be insured person, including questions about their medical history. The insured may also need to undergo a medical exam. Some of the best life insurance companies are exploring alternative ways to assess health status including the use of algorithms that assess publicly available data.

Based on the information the insurer collects during underwriting, it’ll either approve or deny coverage. If approved, the policyholder can decide how much of a death benefit they want. That's the money that will be paid out if the insured person dies during the term of coverage. The death benefit could potentially help protect family members against financial devastation because of an untimely death.

The policyholder pays monthly premiums for the duration of the time the life insurance policy is in effect. The premium cost is determined by the insured person's health status, the amount of coverage, and the type of policy chosen. For example, term life plans, which remain in effect for a set period, tend to be less expensive than whole life insurance plans, which could remain in effect indefinitely.

Life insurance policyholder vs. beneficiary

When you apply for life insurance coverage, it's important to remember that you are the policyholder but not the life insurance beneficiary.

The beneficiary is the person (or entity) who actually receives the death benefit if the insured person dies. For example, if you get life insurance on yourself, you could name your spouse as your beneficiary. If you die while covered and you had purchased a policy with a $250,000 death benefit, your spouse would receive a $250,000 payout upon your death from a covered cause.

You can usually name anyone you'd like as your life insurance beneficiary, including individuals, trusts, or charities. You can also typically name multiple beneficiaries — for example, you could provide half of your death benefit to each of your children.

The beneficiaries are not responsible for paying the life insurance policy premiums and can't change coverage. But, ultimately, they are the ones you are helping to protect when you buy life insurance coverage.


What's the difference between the policyholder and the insured?

A policyholder is a person who enters into a contract with the company. The policyholder decides the amount of coverage to apply for, ensures the accuracy of the application, and pays insurance premiums. The policyholder also decides who is insured, or covered, by the policy.

In most cases, the policyholder is the same person as the insured for life insurance. Usually, for example, you'll apply for life insurance on your own life so if you die, your loved ones receive a death benefit. In that case, you are the policyholder and the insured.

Sometimes, however, you may choose a policy that covers someone else's life, such as your spouse's life. In that case, you'd be the policyholder but the individual whose life is covered would be the insured.

What happens if no beneficiary is named on a life insurance policy?

Generally, a life insurance policy becomes part of the insured person's estate if no beneficiary is named. State laws determine what happens to property in an estate when the deceased didn't provide an official estate planning document, such as a will, that specifies who inherits it.

What are the responsibilities of a life insurance policyholder?

A policyholder enters into a contract with the insurance company. Policyholders determine how much coverage to buy, apply for a policy and ensure the accuracy of information provided on the application, and pay insurance premiums. Policyholders are also responsible for designating a beneficiary.

The bottom line

A policyholder is simply a person who applies for insurance coverage and thus enters into a legal relationship with the insurer.

Policyholders exist with all types of insurance and usually are covered by the policy they apply for. They have important obligations, including paying premiums and making sure they've bought a sufficient amount of coverage to help provide financial protection to their loved ones.

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Author Details

Christy Rakoczy

Christy Rakoczy has a Juris Doctorate from UCLA Law School with a focus in Business Law, and a Certificate in Business Marketing with an English Degree from The University of Rochester. As a full-time personal finance writer, she writes about all things money-related but her special areas of focus are credit cards, personal loans, student loans, mortgages, smart debt payoff strategies, and retirement and Social Security. Her work has been featured by USA Today, MSN Money, CNN Money and more, and you can learn more at her LinkedIn profile.