It makes sense to be prudent at the time of filling the insurance application form and regularly pay premium after buying the policy.
Harjot Singh Narula
Life insurance policy is taken to financially protect your loved ones against any unfortunate event like death. Acceptance of a death claim by the life insurer and timely payment of the policy proceeds in the case of death will give a cushion effect to the family members financially in the times of pain of losing their loved one.
However, all the death claims are not accepted, and a few of them may be rejected by the life insurance company basis the following mistakes or errors from the customer’s point.
The proposal form is the basic application form which is supposed to be filled by an applicant. The information asked in the proposal form is vital, which forms the basis of the risk assessment /underwriting by the life insurance company. Concealing or hiding any material information may lead to the rejection of the claim. Hiding an important information regarding your pre existing medical condition, family history, other insurance policy details, consumption of tobacco and alcohol related details, and other related information impacting the risk assessment may prove fatal in the long run.
Example: If death happens due to any pre-existing disease which was not mentioned in the proposal form. The insurance company will repudiate the claim basis the non disclosure in the proposal form.
Insurance company scrutinizes the proposal form and other substantiating documents and facts to assess the genuineness of the claim. Any concealed information at inception may lead to a repudiation of the claim and all your money paid towards the insurance policy will go in vain.
Important tip: It is highly advisable to disclose all the material facts in the proposal form to avoid any claim rejection on the grounds of non disclosure at a later stage. Any concealment of the information will defeat the entire purpose of buying a life insurance policy.
Misrepresentation means that you might have disclosed the information, but not correctly. Misrepresentation of any material information in the proposal form will affect the risk assessment of the life insurance company which will deviate or mislead the company from the actual risk.
Example: Raman is a chain smoker, but he misrepresented the fact and mentioned the information wrongly, that he smokes occasionally.
At times, the misrepresentation can be unintentional also by the applicant due to an incomplete understanding of the information asked in the proposal form or due to filling the proposal form in a jiffy.
Important tip: It is advisable to read and understand the proposal form clearly and disclose the right and complete information asked in the form. In case of any doubts or hiccups faced while filling the proposal form, it is prudent to clarify your doubts with the life insurance company to avoid any issues at the later stage.Take out time to fill the proposal form and avoid filling it in a hurry.Life insurance policy is a long term legal contract which requires your due diligence.
3.Allowing the agent to fill the proposal form
In most cases, agents fill the proposal form and the customer simply sign the form blind folded.At times, the agent may not be aware of certain information related to the applicant, like applicant’s medical history, family history, details about other insurance policies, exact height & weight details, etc. Without bothering to ask the applicant, the agent might fill the wrong details in the proposal form for quick policy issuance to complete his sales targets.Some agents deliberately mention wrong information to avoid any medical test which an applicant has to undergo and to get the policy issued quickly.
Important tip: It is advisable to fill the application form yourself and disclose all the information accurately. Basis the information provided in the proposal form the life insurer will decide whether to grant life insurance policy at normal premium rates, at extra premium rates ( loading) or decline the proposal.Life insurance company scrutinizes each and every claim before releasing the policy proceeds.
4.Lapsed status of a life insurance policy
The life insurance company do not pay any claims if the policy is in lapse mode. All the benefits and coverage stops when a life insurance policy turns from premium paying policy to a lapsed policy.The policy acquires lapsed status when the policyholder does not pay the due premium towards the policy.There is a fixed premium payment date on which the policyholder has to make the due payment to keep the policy status as premium paying.Also, the life insurance company gives 30 days grace period for the premium payment. Non payment of the premium amount within the grace period bracket will terminate all the benefits under the policy until you revive the policy again.
Important tip: It is advisable to pay your premiums on time or before the actual payment date. Procrastination in payment of premium might prove to be very expensive and unfortunate for your family. These days, every insurance company offers the online premium payment facility which hardly takes few minutes to pay the premium towards your policy.Be alert and avoid your life insurance policy to go into a Lapse status.
5.Incomplete nomination details
The nominee is the receiver of the death proceeds under the life insurance policy. Incomplete nominee details or not updating the nominee details may create a problem at the claims stage. Though, the life insurance company will not repudiate the claim on the basis of incomplete nominee details, but it will create a ruckus followed by legal formalities at the crucial time of claims for your family members. Inappropriate or incomplete nomination details will unnecessarily result in disputes and delay in the claim payout.
Important tip: It is advisable to declare your nominee and keep your nominee details updated to avoid any confusions regarding the receiver of the policy proceeds. In case the nominee is a minor, nominate a trustworthy “appointee” to ensure the proceeds are in the right hands in your absence. Multiple/successive nomination is also permitted under Section 38 of the Indian Insurance Act,1938.
6.Cause of death
There are certain causes or factors which may result in death of a life insured.Such specific causes which are not covered under the purview of the life insurance coverage like death due to a drug overdose, death due to intoxication, suicidal death, death due to misuse or addiction of an unprescribed drug will not be payable .
Important tip: Read the policy wording and document carefully to be aware of the policy coverage, benefits, exclusions in detail.
Conclusion: Life insurance policy is an important risk mitigation tool to protect the financial security of your family. Don’t treat it as a mere tax saving tool and be prudent in your actions from the application stage and during the course of the policy term to ensure that your family gets its due amount in case of any unfortunate event from the life insurance company.