What does “policyholder” mean for insurance?

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Key takeaways...

You can’t go to your local market or retail store to pick up an insurance policy when you need it. Auto insurance isn’t a tangible good that’s found on store shelves; it’s a personalized financial contract.

In order to buy an auto policy, you have to provide your personal information and then find a policy that you qualify for based on the underwriting guidelines that have been set.

Since insurance is a contract, you’re not just classified as a customer when you enter into the contract.

While you do fit the definition of a customer, insurance companies also classify their customers as policyholders.

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What does it mean when you’re a policyholder?
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In the broadest sense, a policyholder is an individual, a group of individuals, or an organization who holds an insurance policy through a specific carrier. Some companies will say that the policy is written in the policyholder’s name.

Other carriers classify the policyholder and the named insured or insureds that are found on the declarations page of the policy.

The Policyholder Owns the Insurance Policy
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All of the insurance documents printed up will have the policyholder’s name on them. These documents include the mailers, the declarations page, the invoices, the auto ID cards, and any other verification papers you receive.

All of the documents are in the policyholder’s name because it’s the policyholder who entered into the contract with the company.

When you shop for insurance, it might not seem like it, but you’re getting quotes to see how much it will cost you to enter into an indemnity contract. An indemnity contract means the company will protect you against financial loss as long as you’re paying your premiums that you’ve agreed to.

Since it’s the policyholder who must apply for the coverage, they are the owner of the policy.

The Policyholder Must Have an Insurable Interest in the Car

The name on the policy has to match the name on the vehicle registration if you want to be sure that you’re complying with state law.

To prevent any issues, the carrier will require that you have an insurable interest in the car to be a policyholder.

Technically, having an insurable interest means that you stand to lose money if something were to happen in a vehicle. In other words, you could lose your assets if you damaged someone else’s property, or you could lose money if your own car is damaged.

When it comes to insuring a car, you must be the registered owner of the car.

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The Policyholder is Responsible for Making On-time Payments

The only way to keep your auto insurance policy active is to pay the premiums that are due on time.

In the main insuring agreement, it says that the insurer only agrees to pay for your losses when you pay your premiums. It’s no other person’s duty but the policyholder’s to make the payments agreed upon.

Policyholders Can File Claims for Benefits
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It’s the policyholder who’s buying the policy so they can file a claim for benefits when an accident happens. Not just anyone can file a claim and expect the check to be cut to them, even if that person is a listed driver on the policy.

When you’re getting a payment for first-party benefits like comprehensive, collision, or medical payments, the settlement check will be in the names of the policyholders.

Is the policyholder the same thing as the driver?
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The terms “policyholder” and “driver” refer to two different things in the insurance world. The policyholder owns the contract, owns the property insured, and has a duty to pay the premiums. The driver, on the other hand, is someone who is listed to drive on the policy.

The driver can affect the premiums, but they don’t have a say in how the car is covered.

Most of the time, high-risk drivers will have a dramatic effect on your insurance rates when you’re getting preferred rates. Policyholders are almost always drivers, but many rated drivers aren’t policyholders.

Only the Policyholder is Authorized to Make Changes to the Policy

If you’re buying a new car, adding coverage to an existing car, deleting a car, or changing your address, you have to be a policyholder to make changes. If changes need to be made and you aren’t authorized to do so, the policyholder will have to request it.

As you can see, it’s important to understand what the term policyholder means when you’re buying auto insurance.

When you’re shopping around, you should always select sufficient coverage that you can afford to maintain.

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