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Proposer Meaning in Insurance

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Proposer meaning in Insurance
February 14, 2024

Table of Content

 

As life gets more uncertain, people have started realising the need for life insurance. But to purchase the right insurance for your needs and reap the benefits of the policy in full, it’s crucial to understand the terms used to describe the policy features and outcomes. Understanding the concepts with clarity can help you in making an informed decision. One of the most important terms in life insurance is the ‘proposer’. Let us start with its definition before going into further details.

What is a proposer in insurance?

In formal terminology, a proposer in insurance is the one who appeals to the insurance company to initiate a policy and submits the request. It is based on the information shared by this person that the insurer decides whether to accept the proposal and approve the request. Once the policy is approved, it’s the proposer who is liable to pay the premiums.

Who is the proposer in insurance?

The meaning of proposer in insurance is the person who purchases the policy either for self or for someone else. Thus, the proposer may or may not be the person insured by the policy. For example, if you buy a life insurance policy for yourself, you are the proposer as well as the insured. But if you buy a policy for your spouse, your child or a dependent parent, the corresponding person is the insured while you are the proposer. In both cases, it’s you who is liable to pay the premiums.

What is the role and responsibility of the proposer in insurance?

The role and responsibility of the proposer in insurance are extremely crucial. Because it’s his/her shared information and activities, that will lead to the approval, smooth operation and availability of benefits of the policy. Following are the roles and responsibilities, the proposer needs to carry out. 

  • Contract initiation: 

    • It’s the proposer who initiates the insurance request. The type of the policy needed, the policy coverage amount and tenure as well as other related decisions are taken by him/her. 

  • Sharing and updating of information: 

    • It’s the responsibility of the proposer to share accurate and complete information with the insurance provider. Based on the information shared, the premium amount and the terms and conditions are decided for the policy. In turn, the acceptance of the proposal form, the approval and the issuance of the policy take place. Subsequently, the proposer is responsible for updating the insurer about any change in the information shared during purchase, like health condition of the insured.

  • Premium payment: 

    • Once the policy is purchased, the regular premium payment to keep it active is the responsibility of the proposer. 

  • Cancellation of policy: 

    • If need be, it’s the proposer who can request for cancellation of the insurance policy. 

  • Altering beneficiary: 

    • In case the requirement arises to change the beneficiary or the nominee of a policy, it’s the proposer who needs to do it. 

Why is a proposer important in insurance?

It’s the proposer who needs to fill in the proposal form for insurance and submit it to the insurance provider. He/she is supposed to share accurate and complete information. The insurer uses the information shared in the application to gauge the risk of insuring the individual or the entity for whom the policy is supposed to be purchased. Accordingly, the proposal is accepted or declined. Once the policy application gets approved and issued, the proposer needs to continue with the premium payments to ensure active coverage of the policy. Such responsibilities make the proposer important in insurance. 

Difference between proposer and life-assured

In the case of a life insurance policy, it’s crucial to know the difference between the proposer and the life assured. Here the proposer is the one, who submits a request to initiate the policy, purchases it and maintains the premium payment schedule to keep the policy active. Whereas, the life assured is the person, who has the life cover in his/her name. This person gets his/her life assured so that in the event of an unfortunate demise, the nominee or the beneficiary gets the sum assured of the policy as a death benefit. The proposer can buy the policy for self or anyone else. 

Thus, the life assured can be the proposer or a different person. However, to buy a policy for someone else, the proposer must have an insurable interest in the insured’s life. For instance, a person desires to safeguard his/her spouse, child or parent’s life. This implicates his/her insurable interest in the insured’s life.  

Change of proposer name in life insurance

A proposer’s name in insurance can be changed when he/she dies or the insured minor becomes an adult. However, these are applicable only when the proposer buys the policy for someone else. In this case, if the proposer dies, the policy gets transferred to the name of the person insured or to someone specified in the proposer’s will. To change the name of the dead proposer, the insurance provider needs to be notified and consequently filling up a ‘change of ownership’ form and submission of relevant documents are required. 

Difference between the proposer and insured in life insurance

The proposer and the insured in life insurance can be the same or a different person. They are the same when the proposer purchases the policy for themself and different when he/she buys it for someone else. The following table illustrates the points of difference between a proposer and an insured in life insurance. 

Proposer in life insurance

Insured in life insurance

Buys the policy and pays premiums

Gets covered by the policy and need not pay premiums

Proposer’s death doesn’t lead to death claim

Insured’s death leads to death claim

No death benefit for the family if he/she is not the insured person 

Family gets a death benefit

Proposer should have an insurable interest in the insured’s life

An insured doesn’t necessarily need an insurable interest.

Proposer needs to have an income source

Insured doesn’t need a source of income

Proposer can claim tax benefits on premium payment

Insured can’t claim tax benefits for premiums paid

Proposer is not entitled to maturity benefit

Insured is entitled to maturity benefit

Proposer can be the nominee of the policy

Insured can’t be the nominee of the policy

Conclusion

The proposer thus is an integral and immensely important person in life insurance as he/she is the source of primary information for the insurer. It’s because of this person, the policy application gets approved and issued. Once you understand this, the whole process of getting life insurance becomes an easy deal. 

FAQs about proposer in insurance

Q. When Does a Proposer Become a Policyholder?

When a proposer purchases a policy for self, he/she becomes the policyholder. 

Q. What happens if the proposer dies in life insurance?

If a proposer in life insurance dies, the policy gets transferred in the name of the insured or someone specified in the proposer’s will. To get this activated, a change of ownership request needs to be submitted with relevant documents. 

Q. Can the proposer and nominee be the same?

Yes, a proposer and nominee can be the same person. For example, if an individual purchases a policy for the spouse or a parent, the proposer can be the nominee.

Q. Can the proposer receive the benefit amounts from insurance?

A proposer can receive the benefit amounts from the insurance if he/she is either the insured or the nominee. As the insured, he/she can get the maturity benefit. Alternatively, he/she will be entitled to the death benefit, when enlisted as a nominee. 

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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