What does policyholder mean: understanding your role and responsibilities
13.04.25
4
Minutes
Katrin Straub
Managing Director at nextsure
The term policyholder is central to the insurance industry, but what exactly does it mean? Many people do not know their exact rights and obligations, which can lead to problems in the event of a claim. This article explains in a well-founded and practical way what it means to be a policyholder and how you can make the most of your position.
The topic in brief and concise terms
The policyholder is the insurer’s contractual partner, owes the premium and has rights of design as well as claims to benefits.
Important obligations of the policyholder are the duty to disclose information truthfully before the contract is concluded and the timely payment of premiums.
The policyholder is not always the same as the insured person; this distinction is relevant for rights and obligations.
Defining the policyholder’s core role
The policyholder is the person or legal entity that enters into an insurance contract with an insurance company. This party is responsible for paying the agreed insurance premiums and, in return, receives the insurance cover set out in the contract. In more than ninety per cent of cases, the policyholder is also the insured person. The precise definition and the associated responsibilities are set out in the Insurance Contract Act (VVG). A clear understanding of this role is the first step towards effective risk management.
The importance of the policyholder goes beyond the mere conclusion of the contract. He or she holds the design rights, and can therefore, for example, terminate the contract or request changes. This central position requires an awareness of the consequences of every decision. For instance, the choice of the sum insured, which the policyholder sets, can make a difference of several thousand euros in the event of a claim. Knowledge of one’s own position is therefore essential for every policyholder.
Overview of the policyholder’s rights and obligations
As the policyholder, you enjoy a range of rights that ensure your protection. First and foremost, this includes the right to the agreed insurance benefit in the event of a claim. You also have a comprehensive right to information regarding all contract details and can initiate changes to the contract if required. Another important right is the right to cancel, for example in the event of a premium increase of more than five per cent without a corresponding extension of cover. You can find the exact conditions for this in your policy document.
However, these rights are also accompanied by obligations, compliance with which is crucial to the continuation of insurance cover. The main obligation is the timely and full payment of insurance premiums. Another key duty is the pre-contractual duty of disclosure: all material risk factors must be disclosed truthfully to the insurer when the application is submitted. If an applicant, for example, fails to mention a pre-existing condition when taking out disability insurance, this may result in the insurer being released from liability. There are also notification obligations during the term of the contract, for example in the event of an increase in risk. Breach of these duties can have serious consequences, ranging from a reduction in benefits to loss of insurance cover.
Quick Facts: Policyholder at a glance
For a quick understanding of the policyholder’s role, the key points are summarised here. These facts provide an initial overview.
Contractual partner: The policyholder is the insurer’s direct contractual partner and owes the premium.
Design rights: They have the rights to shape the contract, such as cancellation or amendment.
Entitlement to benefits: In the event of an insured claim, the policyholder is entitled to the agreed benefit.
Duty to provide information: They must inform the insurer about all relevant circumstances (duty of disclosure).
Payment of premiums: Timely payment of contributions is a key obligation.
Insured person: Often, but not always, the policyholder is also the insured person.
These key points illustrate the central and active role that a policyholder plays in the insurance relationship. Awareness of these aspects is essential for a successful contractual relationship.
Practical examples: The policyholder in everyday life
To make the role of the policyholder more tangible, let us consider a few everyday situations. Let us assume that Mr Müller takes out motor third-party liability insurance for his new car. He is therefore the policyholder and, as a rule, also the keeper and the insured person. He pays a monthly premium of 70 euros. If he causes an accident, he reports the claim to his insurer as the policyholder, and the insurer then covers the costs of the other party involved. If Mr Müller were to report the claim only after three months, the insurer could reduce the benefit.
Another example is Ms Schmidt, who takes out household contents insurance for her flat. She is the policyholder. In the event of a burglary, in which items worth 5,000 euros are stolen, she reports the claim. The insurer reviews the case and provides compensation. If Ms Schmidt had stated an insurance sum that was too low when taking out the insurance (e.g. only 20,000 euros for an actual value of 40,000 euros), this could result in underinsurance and therefore a proportional reduction in the benefit. These examples show how important it is to fulfil obligations correctly and understand the details of the contract. Consider whether, in your buildings insurance, the policyholder is not the owner; this can raise specific issues.
Expert knowledge: legal foundations and current rulings
The legal basis for the relationship between policyholder and insurer is the Insurance Contract Act (VVG). This Act sets out in detail the rights and obligations of both parties. Particularly relevant are the provisions on the duty of disclosure (§ 19 VVG), breaches of obligations (§ 28 VVG) and termination (§§ 39-40 VVG). A breach of the duty of disclosure, for example failing to mention a hazardous sport when taking out accident insurance, can entitle the insurer to withdraw from the contract or refuse benefits. Many policyholders underestimate the significance of the duty of disclosure before the contract is concluded.
Recent court rulings continue to clarify the interpretation of the VVG. The Federal Court of Justice (BGH), for example, has repeatedly ruled on the circumstances in which grossly negligent causation of the insured event leads to a reduction in benefits (e.g. BGH, judgment of 22 June 2011 – IV ZR 225/10). A ruling by the Higher Regional Court of Munich (20 July 2018 – 25 U 1277/18) confirmed that a breach of the duty to mitigate loss can lead to a refusal of benefits. In complex situations or disputes with the insurer, it is advisable to seek legal advice. Knowledge of the insurance policy is fundamental in this regard.
Our expert tip: document all information and notifications to your insurer carefully. In the event of a dispute, complete documentation, for example of the exact time a claim was reported, can be decisive. Keep copies of all correspondence and the application form for at least the duration of the statutory limitation period of three years.
Policyholder and insured person: An important difference
It is important to distinguish between the policyholder and the insured person, even though these roles are often filled by the same person. The policyholder is the contracting party of the insurer and has the rights and obligations under the contract. The insured person is the person whose life, health or property is covered by the insurance. A classic example of this distinction is when parents take out personal accident insurance for their child. The parents are the policyholders, the child is the insured person. In this case, the parents, as policyholders, receive the insurance benefit if something happens to the child.
This distinction has practical consequences. Only the policyholder can amend, cancel or request information from the insurer. Without the policyholder’s consent, the insured person generally has no direct contractual claims against the insurer, unless they are also the beneficiary. This is particularly relevant in life insurance or where the vehicle owner and policyholder differ in motor insurance. The clear definition of these roles in the insurance policy is therefore of great importance.
A change of policyholder is possible under certain circumstances and means that another person or legal entity steps into the existing rights and obligations of the insurance contract. This often happens in the field of life insurance, for example when selling a policy on the secondary market. The original contract remains in force; only the contractual partner on the policyholder side changes. The insurer's consent is required for such a change. As a rule, the new policyholder must assume all obligations, including premium payment.
A practical example is the transfer of an endowment life insurance policy. Suppose Mr Klein has a life insurance policy with a surrender value of EUR 10,000 and wants to surrender it early. Instead of cancelling it, he can sell it to a specialist purchaser (new policyholder), who often pays a higher price than the surrender value. The insurer must agree to this change. A change of this kind can have tax consequences and should be carefully reviewed. Even in the event of death, taking over a car insurance policy can constitute a change of policyholder. Find out in advance exactly about the conditions and possible effects.
Recommendations for policyholders
To fulfil your role as a policyholder as effectively as possible and to ensure your insurance cover, you should observe a few basic recommendations. These will help you avoid pitfalls and safeguard your rights effectively.
Carefully review contractual documents: Before taking out the policy and throughout its term, read your insurance contract and the General Insurance Conditions (AVB) carefully. Pay particular attention to exclusions and obligations. There are often details hidden here that can make a difference of thousands of euros in the event of a claim.
Provide truthful information: When applying, be absolutely honest and complete. Concealed circumstances can result in loss of insurance cover. This accounts for at least ninety per cent of all claim rejections due to breach of pre-contractual disclosure obligations.
Report changes immediately: Inform your insurer straight away about relevant changes, such as a move, a new bank account details or an increased risk (e.g. taking up a high-risk activity). A delayed notification can have disadvantages.
Pay premiums on time: Make sure your contributions are always paid on time so that your insurance cover is not put at risk. Even a delay in payment of just a few weeks can lead to cancellation.
Report claims without delay: In the event of a claim, inform your insurer as quickly as possible. Be sure to observe the deadlines stated in the contract.
Documentation: Keep all documents and correspondence relating to your insurance policies carefully. This also includes the policy number.
Regular review: Check at least every two to three years whether your insurance cover still matches your current life situation.
By following these points, you can avoid many problems and ensure that your insurance policies provide the expected protection when needed. If you are unsure, professional advice, such as that offered by nextsure, can be very helpful.
Conclusion: Actively shape your status as a policyholder
The role of the policyholder is far more than a passive formality. You are the active shaper of your insurance cover and bear significant responsibility. A sound understanding of your rights and obligations, from accurately providing all details when the contract is taken out to promptly reporting a claim, is crucial for a successful partnership with your insurer. Make use of your right to information and review contract details carefully. A proactive approach to your insurance matters can spare you a great deal of hassle and financial loss in the event of a claim. Remember that an adjustment to your insurance cover, for example after a change of employer and notifying the insurer, may be necessary.
Request your individual risk analysis now: Have your insurance situation reviewed free of charge and receive specific recommendations for improvement.
More useful links
Wikipedia provides a comprehensive overview of the role of the policyholder in insurance law.
The Federal Ministry of Finance provides information on insurance tax and its legal basis in Germany.
FAQ
Who is the policyholder?
The policyholder is the natural or legal person who enters into an insurance contract with an insurance company. This person is obliged to pay the insurance premium and is entitled to the insurance benefits under the contract.
What are a policyholder’s main obligations?
The main obligations include the timely payment of insurance premiums, answering all of the insurer’s questions truthfully before the contract is concluded (pre-contractual duty of disclosure) and during the term of the contract, as well as promptly reporting any loss event.
What happens if the policyholder breaches their obligations?
A breach of duty (breach of an obligation) can, depending on its severity and degree of fault, result in the insurer reducing the benefit, refusing it altogether, or terminating the contract. In the event of fraudulent misrepresentation, the contract may be challenged.
Can the policyholder withdraw from the contract?
Yes, policyholders generally have a statutory right of cancellation of 14 days after receiving the contract documents. In addition, there are rights of termination, e.g. on expiry of the contract or extraordinary termination rights in the event of premium increases.
Is the policyholder always also the insured person?
No, not necessarily. The policyholder can also take out insurance in favour of another person (insured person). Example: A father (policyholder) takes out accident insurance for his child (insured person).
Where can I find information about my rights and obligations as a policyholder?
The specific rights and obligations arise from your insurance contract, the General Insurance Conditions (AVB) and the Insurance Contract Act (VVG). Your insurance policy also contains important information.
