Policyholder and insured person: your roles and rights clearly defined
15.05.25
4
Minutes
Katrin Straub
Managing Director at nextsure
Who takes out the policy, and who is covered? Often, the policyholder and the insured person are the same, but differences can bring both opportunities and risks. This article examines the important distinctions and gives you practical recommendations.
The topic in brief and concise terms
The policyholder enters into the contract and has the obligations (e.g. premium payment), the insured person enjoys the cover.
With life insurance, inheritance tax can be avoided by making a clever choice of policyholder and beneficiary (e.g. cross-insurance).
In personal insurance, the insured person often needs to give their consent if they are not themselves the policyholder (§ 150(2) VVG).
Roles in the insurance contract: understanding the basics
The policyholder (VN) is the person or company that enters into the insurance contract with the insurer. They are the primary contact and the policyholder. The insured person (VP) is the person whose risk – whether life, health or property – is covered by the contract. In many cases, for example with private liability insurance taken out for oneself, the policyholder and the insured person are identical; in such cases, there are only two parties involved. However, up to four parties may be involved if, for example, the payer of the premiums and the beneficiary in the event of a claim differ from the policyholder and the insured person.
The key differences at a glance
The distinction is essential for the allocation of rights and obligations. The policyholder is obliged to pay the premium, as set out in Section 1 of the Insurance Contract Act (VVG). They have the right to receive the insurance certificate (Section 3 VVG) and to make changes to the contract. The insured person, by contrast, is the person to whom the insurance cover relates and who receives the insured benefit in the event of a claim, provided they are also entitled to the proceeds. Understanding this distinction is the first step towards tailor-made protection. This clear allocation of roles ensures transparency and forms the basis for all further interactions with the insurer. The exact definition of these roles in the contract is therefore crucial for claims processing.
Optimise the rights and obligations of the policyholder
The policyholder has a range of rights and obligations laid down in the VVG. Among the most important duties (obligations) is the timely payment of insurance premiums in accordance with Section 33 VVG. Another key obligation is the pre-contractual duty of disclosure under Section 19 VVG: all material risk-related circumstances must be disclosed to the insurer truthfully before the contract is concluded. During the term of the contract too, material changes, such as a increase in risk in building insurance, must be reported without delay (Section 23 VVG). In the event of a claim, there is an obligation to notify without delay (Section 30 VVG) and to cooperate in establishing the loss (Section 31 VVG), as well as to mitigate the loss (Section 82 VVG). Careful fulfilment of these duties secures the full entitlement to benefits. Breaches may, depending on fault, lead to the insurer being released from liability (e.g. under Sections 21, 26, 28 VVG). The policyholder's rights include the right to advice and the right to terminate under certain conditions (e.g. ordinary termination under Section 11 VVG or extraordinary termination under Section 40 VVG). Knowing these aspects makes it possible to actively shape the contract.
The insured person: using cover without direct contractual obligations
The insured person (VP) is the beneficiary of the insurance cover, even if they did not themselves take out the contract. Their primary role is to “embody” the insured risk. As a rule, the VP has no direct contractual obligations towards the insurer, such as paying the premium – that is the responsibility of the policyholder. However, duties to cooperate may arise for the VP, particularly in the event of a claim, for example by providing truthful information about how the loss occurred. Pursuant to section 44 VVG, in the case of insurance taken out for another person’s account, the rights under the insurance contract generally belong to the insured person. However, they may often only dispose of these rights with the policyholder’s consent or upon presentation of the insurance certificate.
It is important to obtain the VP’s consent in personal insurance. For example, a life insurance policy on the life of another person requires that person’s written consent if the benefit exceeds the usual funeral costs (section 150(2) VVG). The same applies to accident insurance (section 179(2) VVG). The knowledge and conduct of the VP may be attributed to the policyholder (section 47 VVG). This illustrates how closely the relationship between VN and VP is legally structured, even though the VP is not a direct contracting party.
Practical examples: policyholder and insured person in everyday life
The separation of policyholder (VN) and insured person (VP) is used in many everyday situations and often offers advantages. A common example is motor insurance: parents (VN) insure their child’s vehicle (VP and keeper) in order to benefit from a more favourable no-claims class. In term life insurance, partners often provide cover for each other. A tax-optimised variant is cross insurance: Partner A is the policyholder and beneficiary under one policy, with Partner B as the insured person, and vice versa. If an insured person dies, the policyholder receives the benefit directly and not from the estate, which can significantly reduce inheritance tax liability, as the allowances for spouses are five hundred thousand euros every ten years (in accordance with Section 16 of the German Inheritance and Gift Tax Act). Here are a few typical constellations:
Parents take out accident insurance for their child: the parents are the policyholders, the child is the insured person.
A company takes out occupational pension provision for an employee: the company is the policyholder, the employee is the insured person.
A partner takes out term life insurance on the life of the other partner in order to be financially protected in the event of death.
In the case of deviating keepership in motor insurance, the keeper is often also the person who drives the vehicle most and is therefore an insured person.
These examples show the flexibility and need to define the roles clearly. The exact policy structure has direct effects on benefits and any tax consequences. A change of policyholder can be an option for existing policies in order to adapt the arrangement.
Expert depth: legal pitfalls and drafting tips
The distinction between the policyholder (VN) and the insured person (VP) involves legal subtleties. A key point is the right to terminate the contract: in principle, only the policyholder can cancel the insurance contract (e.g. by ordinary notice under Section 11 VVG or by extraordinary notice under Section 40 VVG). As a rule, the insured person has no separate right to terminate unless this is expressly provided for in the contract or by law (e.g. in certain circumstances in group insurance). Conversely, the insurer can terminate the contract, for example in the event of a breach of the pre-contractual duty of disclosure (Section 19 VVG), an increase in risk (Section 24 VVG) or non-payment of the premium (Section 38 VVG).
In the case of insurance taken out for another person's account (the policyholder and the insured person are not identical), the insured person's consent to the insurance is often a requirement for validity, particularly in personal insurance (e.g. Section 150(2) VVG for life insurance). If this is missing, the contract may be invalid. Our expert tip: When taking out life insurance to secure loans or provide for dependants, pay close attention to the correct designation of the policyholder, the insured person and the beneficiary in order to avoid tax disadvantages. An incorrect arrangement can mean that the insurance benefit becomes subject to inheritance tax, even though this could have been avoided. The beneficiary designation, i.e. who receives the money in the event of a claim, is set by the policyholder and can be structured as revocable or irrevocable (Section 159 VVG). An irrevocable beneficiary designation significantly restricts the policyholder's options. In the case of a change of policyholder in a motor insurance policy, for example, the impact on the no-claims bonus must be reviewed. A precise understanding of the insurance policy and the General Terms and Conditions of Insurance is essential for both roles.
Recommendations for policyholders and insured persons
For optimal protection and to avoid problems, both policyholders and insured persons should observe a few points. Policyholders should always provide all information correctly and in full, pay premiums on time and report any changes promptly; this ensures insurance coverage for the insured person. Insured persons who are not themselves the policyholder should inform themselves about the existing cover and know who their point of contact (the policyholder) is. The following steps are recommended:
Check your insurance policies regularly: Are the policyholder (VN) and insured person (VP) entered correctly and up to date? Do the insured sums still match your life situation?
Clarify the beneficiary designation: Who should receive the insurance sum in the event of a claim? Is this structured in the most tax-efficient way, especially for life insurance? A discussion with an expert can save five-figure sums in tax here.
Find out about your rights and obligations: Read the meaning of the policyholder and the VP in your contractual terms carefully.
Act when circumstances change: A move, marriage or the birth of a child may make adjustments to the policy necessary.
Document everything: Keep important correspondence and contractual documents carefully.
Our expert tip: In cases of uncertainty or complex arrangements, such as cover for business partners or blended families, professional advice is essential. This is the only way to ensure that the insurance cover really applies in the event of a claim and protects the desired persons. Careful planning and clear communication between all parties involved are key.
The correct distinction and definition between the policyholder and the insured person is fundamental to effective insurance cover. The policyholder arranges the contract and bears responsibility, while the insured person benefits from the cover. In practice, from motor insurance to term life insurance with the aim of optimising inheritance tax, there are many structuring options – but also potential pitfalls. Careful consideration of the respective rights and obligations arising from the German Insurance Contract Act (VVG) and the specific contract is of great importance for everyone involved. Only then can it be ensured that expectations are met in the event of a claim and that no unexpected problems arise, for example due to an incorrect beneficiary designation or a breach of duty. Regular review of your own insurance situation and, where necessary, adjustment to changed life circumstances are therefore essential. In complex cases or where there is uncertainty, consulting an insurance expert is always a worthwhile investment in your own financial security and that of the insured persons.
Request your individual risk analysis now: Have your insurance situation reviewed free of charge and receive concrete suggestions for optimisation.
More useful links
Wikipedia provides a comprehensive overview of the role of the policyholder.
Wikipedia explains the definition and significance of the insured person.
The portal Laws on the Internet provides the full text of the Insurance Contract Act (VVG), which forms the legal basis for insurance contracts.
The Federal Ministry of Health offers official information and insights into the German health insurance system.
The Federal Office for Social Security provides detailed information on the various aspects of health insurance and social security.
FAQ
Who is the policyholder?
The policyholder is the natural or legal person who concludes an insurance contract with an insurance company. They are the holder of the rights and obligations under this contract, are in particular obliged to pay the premium, and receive the insurance certificate.
Who is the insured person?
The insured person is the person whose life, health, property or other risk is covered by the insurance policy. In the event of a claim, they or the beneficiary is entitled to receive payment.
Can the policyholder and insured person be the same person?
Yes, in many cases the policyholder and the insured person are identical. For example, if someone takes out occupational disability insurance for themselves, they are both at the same time.
What role does the beneficiary play?
The beneficiary is the person who receives the agreed sum assured in the event of a claim (e.g. death of the insured person in a life insurance policy). The policyholder appoints the beneficiary.
Why is the distinction between the policyholder and the insured person important for inheritance tax?
In the case of life insurance policies, the payout may be subject to inheritance tax if the insured person was also the policyholder and no different beneficiary was appointed who is themselves the policyholder. By structuring the policy cleverly (e.g. “cross-insurance”, where the beneficiary is also the policyholder), inheritance tax can often be avoided, as the benefit then does not form part of the estate of the deceased insured person.
Does the insured person always need their consent?
Yes, in particular in personal insurance such as life or accident insurance, the written consent of the insured person is required if they are not themselves the policyholder and the insurance is taken out on their life or health (see § 150 para. 2 VVG, § 179 para. 2 VVG).
