What’s the Difference Between a Policyholder and Named Driver on Car Insurance?

Purchasing car insurance can be confusing, especially when you start hearing terms like “policyholder” and “named driver.” While they sound similar, these two terms actually refer to very different roles and responsibilities when it comes to your auto insurance policy.

In this comprehensive guide, we’ll explain exactly what policyholders and named drivers are, the key differences between them, and why it matters for your car insurance.

What is a Policyholder?

The policyholder is the person who actually owns the auto insurance policy. They are responsible for:

• Choosing the insurance company
• Selecting the policy limits and coverage types
• Paying the monthly or annual premiums
• Making any changes to the policy
• Adding or removing vehicles
• Adding or removing drivers
• Canceling the policy

The policyholder’s name is listed first on the policy documents and insurance card. There can only be one or two policyholders per auto insurance policy. If there are two policyholders, this is usually a married couple or domestic partners.

Having two policyholders allows spouses and partners to both manage the policy equally. Both policyholders can make changes, file claims, and take care of billing.

What is a Named Driver?

A named driver, also known as an additional insured driver, is someone who is covered by the auto insurance policy but is not the policyholder. Common examples include:

• Teenage children
• A spouse who is not a joint policyholder
• Any other household member who drives the cars

The named driver is listed on the policy along with the policyholder. They are covered when driving the insured vehicles. However, named drivers cannot make changes to the policy on their own. Only the actual policyholder(s) have the ability to change coverages, limits, vehicles, etc.

The key takeaway is that a named driver has insurance coverage but does not own the policy.

Why Policyholders and Named Drivers Matter

Insurance companies rate and price auto insurance policies based on the risk of each individual driver. Factors like age, driving history, and credit score all get accounted for.

By listing lower-risk individuals as the policyholders and higher-risk drivers as named drivers only, families can sometimes save money on their overall auto insurance premium.

Here are two examples:

1. Parents list themselves as policyholders and their teenage son as a named driver. This allows the parents’ good driving records to be the “main” factor in the rate calculation, keeping costs lower.

2. A husband has DUIs on record while his wife has a perfect driving history. By making the wife the sole policyholder, the policy can be rated primarily on her record. Listing the husband as a named driver leads to lower premiums.

Of course, the insurance company can still rate and surcharge based on the driving history of any named driver. But optimizing policyholders versus named drivers can help minimize the rate impact compared to if the higher-risk driver was listed first.

There are a few other technical differences in terms of claims and billing:

• At-fault accidents – Charged to the driver responsible, but ultimately bills go to the policyholder(s).

• Premium payments – Late or missed payments can negatively affect the policyholder’s credit report, even if the bill wasn’t their responsibility.

• Policy cancellation – The insurance company will notify the policyholder(s) if a policy is being canceled, even for non-payment by a named driver.

Assigning a Primary Driver

When insuring a single vehicle, the policyholder is assumed to be the primary driver. But when there are multiple cars, insurance companies require assigning a primary driver to each vehicle.

The primary driver is the person who uses that vehicle the majority of time. They do not have to be the policyholder.

For example:

• Dad is the policyholder.
• Mom and teen are named drivers.
• Dad’s primary vehicle is Car A. Mom’s is Car B.
• The teen is listed as the primary driver of Car C.

This allows the insurance company to factor in each primary driver’s risk characteristics when rating each vehicle.

Some insurers only allow listing policyholders as primary drivers. In those cases, the wife would have to be a joint policyholder in the above example.

Adding a New Driver to the Policy

What happens if you need to add a new driver who wasn’t listed originally, like a new teenage driver? This works differently depending on their relationship to current drivers.

New family member – Minors and new resident relatives can be added to an existing auto policy right away.

New drivers unrelated to current insureds – There is typically a waiting period before an unrelated new driver can be added. This prevents fraud schemes where policies are taken out immediately before an accident.

New spouse – A new spouse can be added and even made a joint policyholder effective immediately after marriage.

The policyholder must contact the insurance company and formally request any driver additions. Simply letting a new person drive won’t extend coverage to them until they are officially added.

When Can the Policyholder Be Changed?

The policyholder cannot simply be changed while a policy is in effect. However, there are some circumstances where a policy is canceled and rewritten with a new policyholder’s name:

• Divorce – Auto policies can be rewritten in one spouse’s name after a divorce.

• Death – If the policyholder dies, the auto policy has to be canceled and reissued under the name of the new owner.

• Emancipated minor – A policy can be changed from parents to a child who becomes an independent adult.

• Parents no longer pay – If parents were paying for a child’s policy but stop, the policy has to be rewritten in the child’s name alone.

• Non-payment cancellation – If a policyholder stops paying, the other named drivers may need to start their own policy.

In these scenarios, canceling the existing policy and starting a new one in a different name allows the insurance company to reassess risk, rate factors, pricing, etc.

Common Questions About Policyholders and Named Drivers

Here are answers to some other frequently asked questions:

Can the policyholder be different than the owner of the car?

Yes, the policyholder does not have to be the registered owner of the vehicle. For example, parents can be policyholders on a policy that insures a car titled only in the name of their teenager.

What happens if the policyholder dies?

The auto policy needs to be canceled upon death and rewritten under the name of whoever is taking ownership of the insured vehicles. Some insurance companies require a copy of the deceased’s death certificate.

Can a named driver take a car in for repairs after an accident?

Yes, the named drivers have the same coverage as the policyholder when driving insured vehicles. Any driver in an accident can have the repairs covered and completed.

Can a named driver change the policy?

No, only the actual policyholder(s) can make changes to the policy terms, coverages, limits, premiums, vehicles, and drivers. Named drivers are only able to have claims paid out under the current policy.

Are both names on the insurance card?

Not necessarily. Some insurance companies only list the policyholders on the ID cards, even if there are named drivers as well. Both the policyholders and named drivers are still covered.

Who gets the insurance bills?

The bills, notices of cancellation, renewal forms, and other documents will always be addressed and mailed to the policyholder(s). But all drivers are expected to cooperate in paying the premium to keep coverage active.

How to Determine Roles on Your Policy

If you’re unsure whether you are listed as a policyholder or named insured driver, there are a few easy ways to find out your status:

• Insurance card – Check if your name is listed first. But remember some companies only list policyholders.

• Policy documents – Review the declarations page or coverage forms for the complete list of drivers and their roles.

• Call and ask – The insurance company can confirm over the phone or in writing if you are the official policyholder or a named driver.

• Check billing – See if premium invoices and cancellation notices come addressed to you. If all correspondence is going to someone else, they are likely the real policyholder.

Optimizing Your Car Insurance Policy

Understanding policyholders versus named drivers allows you to optimize your auto insurance. Here are a few tips:

• Make the lowest-risk household member the policyholder to potentially lower rates.

• Add higher-risk drivers like