Mr. Kulbhusan Nandwani, Director - NJ Insurance Brokers Pvt. Ltd.
You are about to buy an insurance product. Before you sign on the dotted line, do you realise how important this decision is for you? Buying insurance will be among the most critical financial decisions that you will take in your life, especially so when you are buying a long term policies. So before you actually sign, we would like you to consider a check list that will help you go a step further in ensuring peace and confidence that you have acted with prudence and care and that you have reduced grounds /risks of claim rejection, if they may arise in future.
Not Carefully Choosing the Sum Assured:
The purpose of taking insurance is to cover the financial risks that we foresee for an event. We are contributing towards this risk pool assuring ourselves that if any contingency arises, the amount we have spent/lost will be reimbursed and we will not suffer financially in our lives.
So what should be the adequate cover for a life insurance proposal for a term plan? When your income is permitting you to have, say Rs.1.00 crore sum insured towards your life risk, it may become a worry free survival income for your spouse, if the claim arises, since deposits in a FD kind of instrument will give around Rs.8.00 lacs yearly considering @ 8% interest rate. Have we thought like this?
Many of us unfortunately leave it upon the advisor to decide the sum assured. Often it is decided based on budget rather than on actual need or the actual human life value. At the time of claim, the family will receive the sum assured but if it is not sufficient, the family may face certain unpleasant situations which we leave to the best of your imaginations...
Further, after buying a policy, we often also do not review and audit our own policies which would have been bought 5-6 or 10 years back. Have we thought if the sum insured is still sufficient, keeping in mind your growing responsibilities or inflated medical costs or better living standards?
Selecting suitable insurance product and deciding the right sum insured is at the heart of financial planning. Do engage meaningfully with your advisor and think deep into both these aspects before buying a policy. Think of it not as a product but as a solution that has to fit /resolve a problem that will arise in future.
Do not sign blank /pre-filled proposal forms:
Let us now talk about a short but strong advice which many of us do not follow. The advise is to not sign any proposal form which is blank or not filled by you, whether it is for life insurance, mediclaim, personal accident, motor insurance, home insurance or any other form of insurance.
Why? Because only you are aware of your past history and other important details crucial for filling the forms. The answers to questions relating to you and your lifestyle can be answered only by you and not by somebody else even though he may be your long time advisor. Can anybody guess about your health condition or the risk related to your profession or whether you have claimed under your car insurance policy last year?? OR what amount of money will be required by your family in your absence to maintain the same standard of living.
Chances are, if you just sign a pre-filled form or a blank form, leaving the rest to your advisor, you advisor may or may not fill all information accurately and honestly. Why leave such important form for someone else? After all, it is about you who we are talking about and who else knows you better than you!! The answer is no. This “NO” creates a problem. How? Continue reading ...
Disclose all details honestly:
Many of us often do not disclose all details asked in the proposal form. While some of us may deliberately hide any information, there are many who think that the information is not very important to be disclosed, hence they skip. Well, here is a very important advice. Do not hide but instead disclose all relevant facts asked in the proposal form.
Why? Well here is the explanation for the question...
- Buying an insurance policy is like buying a long term promise. This promise is based on the principle of utmost faith where the insurance company trusts that the information that you are sharing is true and factual to the best of your knowledge.
- At the time of claims, the insurance companies often do a background check or investigation where they verify the medical reports/ case history /doctor's notes, etc. (depending on the nature of the claim) against the details disclosed.
- If they find something which is material to the incident (in their view) but was not disclosed earlier, then the claim may be rejected.
Remember that compromising on the principal of utmost good faith and the mutual trust factor can compromise the honouring of the promise by the insurer. And that will defeat the entire purpose of buying insurance. Hence, when in doubt, disclose but before that, try to not allow any doubt creep in your mind. Remember, it is all about your life, your health, your vehicle risk, your property risk we are talking here.
Let us see an example...
- An advisor has come to you and explained one Health Insurance product which you liked. He knows you from some time and do not visibly have had any physical or medical issues in recent past. So to save your time and to please you, your advisor has already filled in the proposal form for you.
- You are happy that there is less paper work and sign the proposal form without spending time to check the list of questions printed on the proposal form. Here you have ignored our both advices – not signing on blank / prefilled form and disclosing all relevant information.
- After some time, you are hospitalized when your treating doctor asks “have you had this kind of complaint before?? now you suddenly recall “Yes, before 5 years I had a similar kind of complaint and I was treated for so and so”. We have to disclose to the treating doctor don't we?
- You put a claim believing that you will receive the claim. But then, you receive a shock that your claim has been rejected.
- Grounds for rejection:
- This may be a case of not disclosing “Pre-Existing Condition” and it makes your claim not payable.
- This may be a case of “Non discloser of material fact” which again makes your claim not payable.
- This may become “Mis-representation while proposing the risk” making your claim not payable.
Question: If I disclose, my proposal may be rejected...
Well, may be or may be not. Whatever they do, know that rejection of a proposal is much better than getting the claim rejected. And it is not the end of the world...
The intent while filling up forms is to make you aware about the minute facts that become a cause for rejection of your claim. Having a pre-existing disease (PED) or condition in our body does not mean no insurer offers a coverage. Here is what can happen when you actually disclose …
- You may get certain products specially designed and available in the industry for covering PED or certain health conditions
- There may be a provision in the contract where insurers would cover the risk of PED if claim arises after the specified waiting period
- Insurers give cover after taking loading premium
- Insurers may even accept the risk if the pre-medical tests show the normal health condition while proposing the risk.
The learning:
Lets' go back to the health insurance proposal form, you are asked if you are suffering from an aliment or have you been treated in the past or do you have certain abnormality since birth... Often some past history /situation which is not an obstacle in our daily lives is not very well remembered and chances are we may forget disclosing that information.
Further, today with the advancement of medical science & technology, the medical experts can identify the age of disease or an aliment or the injury whether occurred before the policy inception or after. So again no point in not disclosing.
As end customers, we have to be cautious while taking any policy. It is our responsibility to ensure that we get the right policy, the right sum assured and the right disclosures made. In the end, we cannot hope to pass on the buck and blame the advisor after the event occurs. It is highly advisable to spend quality minutes on discussing insurance with your advisor, knowing all the important aspects and then few more minutes to properly fill the proposal form.
Happy Insuring!!
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