The Only Policyholder Definition that Matters for Car Insurance
When it comes to insurance jargon, particularly car insurance jargon, solid definitions can be hard to come by. Sometimes a word has a common meaning but can mean something entirely different when used elsewhere. Other times, the meaning is perfectly clear, but can still be misunderstood as something else. The definition of the word policyholder is a notorious example.
Official policyholder definition
The official policyholder definition used by insurance companies is the person who owns the car insurance policy - i.e. the person in whose name the policy is registered. Typically, policyholder is the only one who can make formal changes to the car insurance policy.
How insurance policies work and why a policyholder is designated
A car insurance policy explains what the car insurance company you have chosen will do for you in the event of a claim. It will also explain what your responsibilities as the policyholder are. There is a declarations page which details how much is covered, what is covered, as well as who is covered within the policy. In the declarations, there is information about your car, how you use it, the car's serial number, (VIN), as well as the make and model of the vehicle.
Your personal information is also found in the declarations. This includes your address, contact information and anyone else you allow to drive the vehicle on a regular basis. Insurance companies tend to use local public records in their research. They do this to find out who else lives in your residence. If there is anyone who is living in the same residence as you and you don't want them on your policy, you would need to list them as an excluded driver. Only the policyholder is able to make any changes to the policy, such as adjusting covered drivers and changing the registered home address.
Why does it matter?
Having a formally determined policyholder is crucial. It prevents chaos in the management of the policy, by ensuring that one customer is ultimately calling the shots.
It's also critical in the matter of who pays for the premiums and deductibles, as well as who is responsible for dealing with the insurance company. Also, while another driver on the policy might be the one who got into the accident, it is the owner of the policy who takes responsibility for the insurance if the driver was at fault.
Why policyholder misunderstandings are risky
There are financial and legal problems you can run into if you're not certain about the policyholder on your auto insurance. For instance:
- A driver listed on the policy might add additional insurance, which the policyholder might not be able to afford
- A driver listed on the policy might drop the insurance to the bare minimum. In case of an accident, the policyholder would have to pay more out of pocket for repairs or to replace the vehicle.
- If a driver signs paperwork intended for the policyholder and says that they are the policyholder, then that driver may later have legal trouble for stating that they are the policyholder.
- If a teenage driver wrongly believes they are a policyholder, they might try to handle issues pertaining to an accident without any legal qualifications to do so.
How does being a policyholder affect your legal rights and responsibilities?
The policyholder has many responsibilities when it comes to their insurance policy. These responsibilities include providing proof of an accident to the insurance company, avoiding misrepresentation to the insurance company, as well as reporting accidents in a timely manner and refraining from concealing that an accident had occurred.
As for legal rights, these depend upon where you live. In Texas, for example, their Consumer Bill of Rights states that your insurance company is not allowed to give deceptive, misleading, or outright false information to the consumer regarding information. Nor are they allowed to require the person to purchase liability greater than the minimum allowed by law. They are also not allowed to deny insurance on the basis of credit.
The difference between a policyholder and a listed driver
A policyholder is a person who owns the car insurance policy and is also the only one who can make any changes to it. A listed driver is someone who also drives the vehicle but does not own the vehicle or pay the insurance premiums. The listed drivers who are not the policyholder are also not able to make any changes to the insurance policy without the authorization of the policyholder.
When does it make sense to have multiple policyholders?
Although you have the option of taking out multiple insurance policies or buying a multi-car insurance policy, having multiple policyholders is often the best solution. Some scenarios where that might make sense include:
- A teen with their parents as additional policyholders
- A married couple on one policy
- An individual who has another person as their power of attorney who pays their bills for them
As a policyholder or the additional listed driver, it is important to know and understand what it means to be a policyholder. This can help to prevent individuals from acting in a way which can lead to financial and legal issues in the future. And of course, as a policyholder, you should diligently research your rights and responsibilities to make sure you stay safe on the road.