IPTM1110 - Fundamental concepts: what is a policyholder?

Policyholder is not defined in the taxes acts. There is a definition in regulatorylegislation, but this extends the definition somewhat beyond the strict meaning in orderto protect the interests of policy beneficiaries. A good working definition for taxpurposes is “any person other than the insurer currently party to an insurance policyor contract and entitled to enforce the insurer’s obligations to provide benefitsthereunder”.

This definition for tax purposes emphasises the point that the policyholder is the legalowner of the policy, who may be different from the person who stands to receive payment orbenefits.

In the case of a life policy, the person whose life is insured may be different from boththe policyholder, namely the legal owner, insured or assured; and the beneficiary. Care isneeded in using these terms, as they are sometimes applied loosely. Thus there may be adifference between the ‘assured’, who is the policyholder, and the ‘lifeassured’, meaning the person on whose life the insurance must be contingent toqualify as a life policy.

Lord Donaldson reviewed the question of who is a policyholder in the case of Scher and others v Policyholders Protection Board and others [1993]3 All ER 384. His judgment makes clear that, for non-life insurance policies thedefinition may be wider but on the authority of section 96(1) Insurance Companies Act 1982for a life or capital redemption policy it is the legal holder, as described above.

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