Policyholder and insured person: Your roles and rights clearly defined
15 May 2025
8
Minutes
Katrin Straub
CEO at nextsure
Who enters into the contract, who is protected? Often, the policyholder and the insured person are the same, but deviations come with opportunities and risks. This article highlights the important differences and provides you with concrete recommendations for action.
The topic in brief and concise terms
The policyholder enters into the contract and has duties (such as premium payments), while the insured person enjoys the coverage.
With life insurance, inheritance tax can be avoided through the clever selection of the policyholder and beneficiary (e.g. cross-insurance).
The insured person often needs their consent for personal insurance if they are not the policyholder themselves (§ 150 para. 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 owner of the policy. The insured person (VP) is the one whose risk – be it life, health, or property – is covered by the contract. In many cases, such as with a personal liability insurance policy for oneself, VN and VP are the same; there are only two parties involved here. However, up to four parties can be involved if, for instance, the payer and the beneficiary in the event of a claim differ from VN and VP.
The Key Differences at a Glance
The distinction is crucial for the distribution of rights and obligations. The policyholder is obliged to pay the premium as stipulated 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, on the other hand, is the one to whom the insurance coverage applies and who will receive the insured benefit in the event of a claim, provided they are also entitled to it. Understanding this separation is the first step towards tailored protection. This clear distribution of roles ensures transparency and is the basis for all subsequent interactions with the insurer. Therefore, the precise definition of these roles in the contract is crucial for claims processing.
Optimising the rights and obligations of the policyholder
The policyholder has a number of rights and obligations enshrined in the VVG. Among the most important obligations is the prompt 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 risk-relevant circumstances must be truthfully disclosed to the insurer before the contract is concluded. Even during the term of the contract, significant changes, such as an increase in risk in a building insurance, must be reported without delay (Section 23 VVG). In the event of a claim, there is an obligation to report immediately (Section 30 VVG) and to cooperate in determining the damage (Section 31 VVG), as well as to mitigate the damage (Section 82 VVG). Careful fulfilment of these obligations secures the full entitlement to benefits. Breaches can lead to the insurer being released from liability, depending on the fault (e.g., according to Sections 21, 26, 28 VVG). The rights of the policyholder include the right to advice and the right to cancel under certain conditions (e.g., ordinary termination in accordance with Section 11 VVG or extraordinary termination under Section 40 VVG). Awareness of these aspects makes it possible to actively shape the contract.
The insured person: Benefit from protection without direct contractual obligations
The insured person (VP) is the beneficiary of the insurance coverage, even if they have not personally concluded the contract. Their primary role is to 'embody' the insured risk. Generally, the VP has no direct contractual obligations towards the insurer, such as paying premiums – this responsibility lies with the policyholder. However, the VP may have duties to cooperate, particularly in the event of a claim, such as providing truthful information about the circumstances of the damage. According to Section 44 of the Insurance Contract Act (VVG), the rights from the insurance contract in the case of insurance for the account of a third party fundamentally belong to the insured person. However, they can often exercise these rights only with the consent of the policyholder or upon presentation of the insurance certificate.
The consent of the VP is important in personal insurance. For instance, in the case of life insurance on another person's life, their written consent is required if the benefit exceeds the usual funeral costs (Section 150 para. 2 VVG). A similar rule applies to accident insurance (Section 179 para. 2 VVG). The knowledge and actions of the VP can be attributed to the policyholder (Section 47 VVG). This illustrates how closely the relationship between the policyholder and the VP is legally structured, even though the VP is not a direct contractual party.
Case Studies: Policyholders and insured persons in everyday life
The separation of policyholder (PH) and insured person (IP) is utilized in many everyday situations and often offers advantages. A common example is car insurance: parents (PH) insure their child's vehicle (IP and owner) to benefit from a better no-claims discount. In term life insurance, partners often insure each other. A tax-optimized variant is the 'cross-insurance': Partner A is the PH and eligible for a contract in which Partner B is the IP, and vice versa. If an IP dies, the PH receives the benefit directly and not from the estate, which can significantly reduce the inheritance tax burden since the tax allowance for spouses is five hundred thousand euros every ten years (according to Paragraph 16 of the Inheritance Tax Act). Here are a few typical scenarios:
Parents take out an accident insurance policy for their child: parents are PH, child is IP.
A company arranges occupational pension provision for an employee: company is PH, employee is IP.
One partner takes out term life insurance on the life of the other partner to be financially protected in the event of death.
In a situation where the vehicle owner differs in car insurance, the owner is often also the main driver and thus an insured person.
These examples demonstrate the flexibility and necessity of clearly defining the roles. The precise contract design has direct implications on the benefits and potential tax consequences. A change of policyholder might be an option for existing contracts to adjust the scenario.
Expert Depth: Legal Pitfalls and Design Tips
The distinction between the policyholder (PH) and the insured person (IP) involves legal nuances. A key point is the right of termination: As a rule, only the PH can terminate the insurance contract (e.g., ordinarily according to Paragraph 11 VVG or extraordinarily according to Paragraph 40 VVG). The IP generally does not have its own right of termination unless explicitly provided for in the contract or law (e.g., under certain circumstances in group insurance). Conversely, the insurer can terminate the contract, for example, in cases of violation of the pre-contractual duty of disclosure (§19 VVG), increased risk (§24 VVG), or non-payment of the premium (§38 VVG).
In an insurance for the account of another (PH and IP are not identical), the consent of the IP to the insurance is often a prerequisite for validity, especially in personal insurance (e.g., Paragraph 150 Section 2 VVG for life insurance policies). If this is missing, the contract may be void. Our expert tip: When taking out life insurance to secure loans or for the benefit of survivors, pay careful attention to the correct naming of the PH, IP, and beneficiary to avoid tax disadvantages. An incorrect arrangement can lead to the insurance sum being subject to inheritance tax, although this could have been avoided. The entitlement, that is, who receives the money in the event of a claim, is determined by the PH and can be revocable or irrevocable (Paragraph 159 VVG). An irrevocable entitlement significantly restricts the PH's options. In the event of a change of policyholder in car insurance, for example, the effects on the no-claims discount must be examined. Familiarity with the insurance policy and the general terms and conditions of insurance is essential for both roles.
Recommended actions for policyholders and insured persons
For optimal protection and to avoid issues, both policyholders and insured individuals should consider a few points. Policyholders should always provide correct and complete information, pay premiums on time, and report changes promptly; this ensures coverage for the insured person. Insured individuals who are not the policyholders themselves should be informed about the existing coverage and know who their contact person (the policyholder) is. The following steps are recommended:
Regularly review your insurance policies: Are the policyholder (PH) and insured person (IP) correctly and currently registered? Do the insured amounts still suit your life situation?
Clarify the beneficiary rights: Who should receive the insurance payout in the event of a claim? Is this structured in the most tax-efficient way, especially for life insurance? A meeting with an expert can save five-figure sums in taxes.
Inform yourself about your rights and obligations: Carefully read the meaning of the policyholder and the IP in your contract terms.
Act upon changes: Moving house, getting married, or the birth of a child may necessitate adjustments to the contract.
Document everything: Keep important correspondence and contract documents meticulously.
Our expert tip: In cases of uncertainty or complex scenarios, such as securing business partners or in stepfamilies, professional advice is essential. This ensures that in the event of a claim, the insurance coverage truly protects the intended individuals. Careful planning and clear communication between all parties are key.
Conclusion: Clarity for the policyholder and insured person creates security
The correct distinction and definition of policyholder and insured person are fundamental for effective insurance coverage. The policyholder designs the contract and takes responsibility, while the insured person enjoys the protection. In practice, from car insurance to term life insurance with the aim of inheritance tax optimisation, the diverse design possibilities, as well as potential pitfalls, become evident. A conscious engagement with the respective rights and obligations arising from the VVG and the specific contract is of great importance to all parties involved. Only in this way can it be ensured that expectations are met in the event of a claim and that no unexpected problems, such as due to incorrect beneficiary designation or a breach of obligations, arise. Regularly reviewing one's own insurance situation and, if necessary, adjusting to changed life circumstances are therefore essential. In complex situations or uncertainties, consulting an insurance expert is always a good investment in one's own financial security and that of the insured persons.
Now request an individual risk analysis: Have your insurance situation examined free of charge and receive specific optimisation suggestions.
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 Gesetze im Internet offers the full text of the Insurance Contract Act (VVG), which forms the legal basis for insurance contracts.
The Federal Ministry of Health provides official information and insights into the German health insurance system.
The Federal Office for Social Security supplies 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 enters into an insurance contract with an insurance company. They are the holder of the rights and obligations arising from this contract, particularly responsible for paying the premium, and receive the insurance certificate.
Who is the insured person?
The insured person is the individual whose life, health, property, or other risk is covered by the insurance. In the event of a claim, they or the beneficiary are entitled to receive the benefits.
Can the policyholder and the insured person be the same individual?
Yes, in many cases, the policyholder and the insured person are the same. For example, if someone takes out an occupational disability insurance policy for themselves, they are both at the same time.
What role does the beneficiary play?
The beneficiary is the person who receives the agreed insurance sum in the event of a claim (e.g. the death of the insured person in a life insurance policy). The policyholder designates the beneficiary.
Why is the distinction between the policyholder and the insured person important for inheritance tax?
For life insurance policies, the payout may be subject to inheritance tax if the insured person was also the policyholder and no different beneficiary has been designated who is also the policyholder. Through clever contract structuring (e.g., "cross-insurance," where the beneficiary is also the policyholder), inheritance tax can often be avoided, as the payout then does not form part of the deceased insured person's estate.
Does the insured person always need their consent?
Yes, particularly 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).
