As one of the vital components of financial planning, life insurance helps individuals and families effectively deal with their life’s unexpected circumstances. During the fiscal year 2023, the Indian Life Insurance Industry sold life insurance policies totaling more than INR 7 trillion. This increase in premiums was a major one when compared to what was recorded in the past financial year. With these prospects, it is expected that the country’s Life insurance market market will have a gross written premium of INR US$105.70bn by 2024. However, despite its heightened significance, there are two integral terms in the domain (like policyholder and life assured) that are often mistakenly confused as the same thing by those who are new to the concept.
Although these two roles may appear interchangeable in appearance, their legal and financial implications are discernibly different. Hence, understanding the difference between these terms is imperative for anyone thinking about or already having a life insurance policy, enabling them to make rational choices.
Exploring the meaning of policyholder and life-assured
The heart and soul of a life insurance policy is the policyholder, the individual or entity paying for the premiums and managing the policy. Their responsibilities include paying premiums, adjusting the policy, for instance, changing the beneficiaries or the amount of cover, updating beneficiary designation, or even cancelling it. In addition, the policyholder also deals with premium payments and may realise a loan against the policy if it has a cash value component.
On the other hand, the life-assured signifies the person whose life is protected/insured under an insurance agreement. The insurer pays the death benefit to rightful beneficiaries upon the demise of the insured person. So often do these two individuals overlap each other in identity, but at times they may be distinct entities altogether.
Key differences between policyholder and life-assured
| Parameter | Policyholder | Life assured |
| Ownership and control | The policyholder is the rightful owner of the insurance policy, who can take actions on it, like changing the beneficiary or modifying the extent of protection. | The life insured, on the other hand, does not directly control the policy because they are the subject of insurance coverage. |
| Premium payment | The policyholder should maintain an insurance policy by paying premiums. | Depending on the specific arrangement, the life-assured might or might not be the one making the premium payments. |
| Beneficiary designation | The policyholder holds the power to designate the beneficiaries who will receive the policy’s death benefits upon the demise of the life assured. | However, the life assured may have a say in choosing the beneficiary, but this is ultimately left to the discretion of the policyholder. |
| Policy ownership | The insurance policy is owned by the policyholder, who can surrender, change, or even cancel it at any time. | Conversely, life assured, being an insured has no straight ownership rights to a given policy. |
Final Words
Considering the substantial size and anticipated expansion of the life insurance market, it is important to analyse these differences for proper financial planning and ascertaining that a life insurance policy fulfills its intended purpose. While life insurance continues to advance with newly developed products or services, one must bear in mind these roles when making decisions that are going to be paramount in years to come.
