When you purchase an insurance policy, whether it is a car insurance policy, a health insurance policy, a home insurance policy or a business insurance policy, two important parties enter into a contractual agreement, the insurer and the insured. These two parties are the pillars of any insurance contract. Knowing them and their interactions enables policyholders to make sound financial choices and avoid confusion in the process of settling claims.
In this blog, we will dissect the meaning of an insurer and insured in simple language and discuss their differences. We will also have a look at their duties as well as how they interact in an insurance policy.
Insurer: Definition, Examples, Roles and Responsibilities
The insurer refers to the company or organization that offers insurance coverage to individuals or businesses. Legally, the insurer refers to the party, which promises to indemnify the insured against losses, damages, or liabilities, as per the terms mentioned in the insurance policy, in consideration of a premium.
In simple terms, an insurer is a risk-bearing entity. It guarantees the insured a financial protection in case a covered event happens, i.e. during an accident, theft or illness, or damage to property.
In India, the Insurance Regulatory and Development Authority of India (IRDAI) typically registers and regulates insurers and this promotes transparency and protection of policyholders. As of 2025, India has more than 60 insurance companies-covering life, health, motor, travel, and business risks.
Some Examples of insurers in India include:
- Life Insurance Corporation of India (LIC)
- ICICI Lombard General Insurance
- HDFC ERGO General Insurance
- New India Assurance Company Limited
- Bajaj Allianz General Insurance
These companies design, price, and sell insurance products suited to different customer needs.
Roles and Responsibilities of an Insurer:
- Risk Assessment: Evaluating the level of risk before issuing a policy (through underwriting).
- Premium Calculation: Setting fair and accurate premiums based on the risk level.
- Claim Settlement: Investigating and paying valid claims promptly.
- Policy Servicing: Managing renewals, endorsements, and customer queries.
- Regulatory Compliance: Adhering to IRDAI norms and consumer protection laws.
The insurer plays a pivotal role in creating financial security by pooling risks from thousands of policyholders and compensating those who face genuine losses.
Insurer: Definition, Examples, Rights and Responsibilities
The insured is the individual or entity who buys the insurance policy and pays the premium to obtain coverage. The insured is the beneficiary of protection—the one who receives compensation when a covered loss occurs.
Simply put, the insured transfers the risk of potential loss to the insurer in exchange for a premium.
Examples of the Insured in Different Contexts:
- In life insurance, the insured is the person whose life is covered.
- In motor insurance, the insured is the vehicle owner.
- In health insurance, the insured is the individual or family members covered under the plan.
- In business insurance, the insured is the company seeking protection from financial or operational risks.
Rights of the Insured:
- To receive policy documents and understand terms clearly.
- To get compensation for valid claims.
- To cancel the policy within the free-look period.
- To receive fair and transparent service.
Responsibilities of the Insured:
- To disclose all material facts truthfully while applying.
- To pay the premium on time.
- To avoid fraudulent or exaggerated claims.
- To maintain and protect the insured property or interest reasonably.
The insured, in essence, ensures the smooth functioning of the contract by being truthful and responsible throughout the policy period.
Key Differences Between the Insurer and Insured
While both the insurer and insured are essential to the insurance contract, their roles are completely opposite. The insurer provides protection, while the insured seeks it.
| Basis of Difference | Insurer | Insured |
| Definition | The company providing insurance coverage. | The individual or business purchasing insurance. |
| Role | Undertakes to compensate for loss or damage. | Pays the premium and receives compensation. |
| Function | Offers financial protection by bearing risk. | Transfers the risk to the insurer. |
| Payment | Receives premium payments. | Pays premium to the insurer. |
| Liability | Legally bound to pay valid claims. | Has the right to receive claim payments. |
| Examples | LIC, HDFC ERGO, Bajaj Allianz | A car owner, a business, or an individual. |
There is mutual dependence between the insurer and the insured. In the absence of the insured, there would be no insurers and in the absence of insurers, people would have to shoulder their own risks. This may, in turn, result in severe financial losses.
The Insurer-Insured Relationship
The relationship between the insurer and the insured is a contractual and fiduciary relationship that is founded on mutual trust and legal obligations. It starts with the insured filling the proposal form and paying the premium and the insurer accepting it by issuing a policy document.
The basis of this relationship is the principle of utmost good faith (uberrima fides). This means, both parties should reveal all material facts in good faith:
- The insured is required to disclose all the pertinent information including medical conditions, driving records, or property ownership.
- The insurer should explicitly define policy terms, coverage limits, exclusion and claim procedure.
Indemnity is another guiding principle, whereby the insured is compensated back to the financial state they were in prior to the loss-neither gaining nor losing unreasonably.
This trust-based relationship is maintained during the policy period- through renewals, claims and service continuation.
How the Insurer–Insured Relationship Works in Practice
In order to see how the relationship works in the real world, we can take a look at how an insurance policy usually operates step-by-step:
1. Proposal and Underwriting of an Insurance Policy
The insured fills out and submits to the insurer a proposal form where all the required details are included. The insurer then determines the risk through a process called underwriting, and decides whether the policy is to be issued and at what premium. As an example, a 25-year-old healthy person would have a reduced health insurance premium as compared to a 50-year-old smoker.
2. Payment of the Premium
Once the proposal is accepted, the insured makes the premium payment, which formally triggers the insurance policy. Premiums may either be one-time (single premium) or periodic (monthly, quarterly, annual).
3. Insurance Coverage Period
The insured is covered against the specific risks the policy covers during the period of the policy. As an illustration, when a car meets with an accident, the insurer will cover the cost of repair (as per the terms and conditions mentioned in the policy).
4. Claim Process and Settlement
In case an insured event occurs, the insured notifies the insurer and submits a claim. The insurer checks the information, evaluates the loss and- if found valid-compensates the same.
Example:
Consider that you possess health insurance of [?]5 lakh. In case you are admitted to the hospital because of an accident, the insurer will cover the hospital bills up to the amount covered by the insurance, which shoulders a lot of your financial burden.
This process shows the harmonious work between insurer and insured- it is a balance of responsibility, risk, and reward.
Common Misunderstandings About Insurer and Insured
Despite being pretty fundamental, these terms can be confusing at times. We will try to debunk a few myths here:
1. Policyholder vs. Insured:
There is a common belief that the policyholder and the insured are always the same. Not necessarily. As an illustration, a father may purchase a health insurance policy (policyholder) to cover his son (insured).
2. The Liability of the Insurer Is Unlimited:
Insurers will be only liable to the extent of the sum insured or policy limit specified in the contract. Anything more than that is not covered, unless mentioned explicitly in the terms and conditions of the insurance policy.
3. Every Loss Will Be Compensated:
The claims are limited to only the covered event losses. Exclusions (such as war, deliberate destruction or wear and tear) are not indemnifiable.
4. Claim Rejection Means Fraud:
In some cases, claims are denied because of a failure to disclose facts or a lack of proper documentation and not because of fraud. Such issues can be avoided by understanding the terms and conditions of the insurance policy.
By clarifying these misconceptions, policyholders can evade frustrations and reinforce their faith in the insurance process.
Importance of Understanding the Roles
Knowing who the insurer and insured are is not just academic—it has real-world consequences. Here’s why it matters:
1. Smarter Policy Decisions
When you understand your role as the insured, you can compare plans better, disclose facts correctly, and select coverage that fits your needs.
2. Hassle-Free Claims
Claim settlements are smoother when both parties know their responsibilities. Miscommunication often leads to disputes or delays.
3. Better Financial Planning
Recognizing how the insurer operates helps individuals and businesses plan their finances, especially for long-term protection like life or liability insurance.
4. Legal Clarity
When a dispute arises, the knowledge of the insurer and the insured is useful in determining who is responsible for what under the insurance contract.
For example, the consumer awareness campaign of IRDAI in India reiterates time and again, on knowing the registration number of the insurer, knowing your coverage and reading your policy document. This awareness also safeguards the consumers against fraud and makes the insurance ecosystem accountable. Ultimately, insurance is most effective when both the insurer and the insured are honest and transparent in their respective actions.
The Bottomline:
All insurance policies, however large or small, are based on two main pillars: the insured ( the person or organization that wants to be insured) and the insurer (who takes the risk). They are connected by trust, law and mutual responsibility.
The insurer injects financial prowess and experience to deal with risks. The insured offers integrity, knowledge, and prompt premiums to maintain coverage. Their combination makes the insurance system work smoothly as it transforms uncertainty into security.
So, the next time you purchase or renew an insurance policy, take a second to appreciate these functions. The distinction between the insurer and insured is not merely a matter of word-play. Rather, it’s the key to securing your financial future efficiently and prudently.
