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Insured / policy holder

Also written policy holder · Insured · Policy holder · Policyholder

The person who buys an insurance policy, pays the premium, and receives the insurer's promise of compensation for a specified future loss.

In plain language

Somebody has to pay for insurance, and somebody has to be covered by it. Most of the time, in a personal policy, that is the same person: the insured, also called the policy holder.

The workbook's own words: a person who buys insurance is known as an insured or the policy holder. This is the person named on the policy document, whose premium keeps the cover alive, and who — or whose family — makes the claim when the insured event happens.

For health insurance the workbook adds a small but useful detail. The insured is the owner of the health insurance policy, or the person with the health insurance coverage. Those can be two different people, such as a parent who owns a family floater that also covers a child.

How it works

The workbook sets up a three-way vocabulary that recurs across every product in Chapter 6:

  • The insurer is the entity that provides insurance and promises compensation.
  • The insured, or policy holder, buys the cover and pays the premium.
  • The insurance policy is the contract itself.

The insured's central right is to receive the insurance policy: the contract containing the conditions and circumstances under which they will be financially compensated. The insured's central obligation is the premium, paid periodically in exchange for the insurer's promise.

The workbook gives no separate figure for who may be an insured. Eligibility — age, health, ownership — is set product by product, not by the term itself.

A worked example

Suman, a 42-year-old teacher in Kochi, buys a health insurance family floater with a Rs 5,00,000 cover. She is the policy holder — she signs the form and pays the annual premium of Rs 14,000.

Her 11-year-old son is also insured under the same policy, even though he never signs anything and never pays a rupee of premium. When he is hospitalised and the bill comes to Rs 60,000, the claim is paid, because he is a person with coverage under Suman's policy — exactly the workbook's health-insurance wording.

Suman remains the one point of contact with the insurer for renewal, premium payment and any change to the policy. That is the policy holder's role, and it is distinct from merely being covered by it.

Why NISM asks about it

Chapter 6 (Insurance Related Products) defines insurer, insured and policy holder in its opening paragraph, before any product is introduced, and its health-insurance entry restates the difference between owning a policy and being covered by it. Expect a definition-matching question pairing each term with its role.

Common exam traps

  • Policy holder and insured are usually the same person, but not always — a family floater covers people who never pay the premium themselves.
  • The insured is not the insurer. A surprising number of candidates reverse who promises to pay and who is protected.
  • The health-insurance note — owner of the policy versus person with the coverage — is the one place the workbook explicitly separates the two roles; expect it to be tested there specifically.

Check yourself

  1. 1.In insurance terminology, who is the insurer and who is the insured?

    1. a)The insurer buys the policy; the insured provides the cover
    2. b)The insurer is the entity which provides insurance; the insured or policy holder is the person who buys it
    3. c)Both terms refer to the person covered
    4. d)The insurer is the agent and the insured is the company
    Show the answer

    Answer: (b) The insurer is the entity which provides insurance; the insured or policy holder is the person who buys it

    "An entity which PROVIDES insurance is known as the INSURER. A person who BUYS insurance is known as an INSURED OR THE POLICY HOLDER." The remaining two words complete the vocabulary: the premium is "a periodic payment", and the insurance policy is the contract the insured receives, "which contains details like the conditions and circumstances under which the insured will be financially compensated." The agent, incidentally, is not part of this definition at all — the contract runs between the insurer and the insured. Health insurance uses the same word with a specific gloss: "the 'insured' is the owner of the health insurance policy or the person with the health insurance coverage."

  2. 2.Which body regulates the insurance sector in India, and what are its stated aims?

    1. a)SEBI, to protect investors and develop the securities market
    2. b)IRDAI, to protect the interests of insurance policy holders and ensure systematic growth of the insurance industry
    3. c)RBI, to maintain price stability in the insurance industry
    4. d)PFRDA, to promote and regulate insurance and pensions together
    Show the answer

    Answer: (b) IRDAI, to protect the interests of insurance policy holders and ensure systematic growth of the insurance industry

    "INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA regulates the insurance sector in India. It aims to PROTECT THE INTERESTS OF THE INSURANCE POLICY HOLDERS and ensures SYSTEMATIC GROWTH OF THE INSURANCE INDUSTRY." Two aims, and both are examinable — protection of policy holders, and orderly growth of the industry. By this point the booklet has given you a regulator for every sector, and distractors are built by swapping them: RBI for banks, currency, credit and NBFCs (Chapter 4); SEBI for the securities market (Chapters 5 and 14); IRDAI for insurance; and PFRDA for pensions (Chapter 7). Grievances in every one of these sectors are routed through Chapter 12.

  3. 3.An investor has a dispute about a cooperative bank deposit and an unpaid life insurance claim, and wants to file both on SCORES because "SEBI is the biggest regulator". What should he be told?

    1. a)SCORES accepts all financial sector complaints
    2. b)Neither is a securities market matter; grievances follow the sector's regulator, and the SEBI helpline itself will name the right authority — RBI, IRDAI, PFRDA or MCA
    3. c)He should file on SCORES under "other entities"
    4. d)He must approach a court directly for both
    Show the answer

    Answer: (b) Neither is a securities market matter; grievances follow the sector's regulator, and the SEBI helpline itself will name the right authority — RBI, IRDAI, PFRDA or MCA

    SCORES is confined to grievances "pertaining to securities market" that remain unresolved by "the concerned listed company or registered intermediary." A bank deposit and an insurance claim are neither. The booklet has built a regulator for each sector: RBI for banking, currency, credit and NBFCs (Chapter 4); SEBI for the securities market; IRDAI, which "regulates the insurance sector in India" and aims "to protect the interests of the insurance policy holders" (Chapter 6); and PFRDA for pensions (Chapter 7). Chapter 12 itself closes with four sector diagrams on exactly these, and Chapter 13 gives the full table — where, incidentally, schemes offered by Cooperative Societies are placed with State Governments. If he is unsure, one free call settles it: the helpline lists among its services "the regulators/authorities whom the investor has to approach for redressal of their grievances that are NOT UNDER SEBI PURVIEW. For example, RBI, IRDAI, PFRDA and MCA."

Where this is taught

Free preparation for NISM Series SEBI-ICE

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