look before you leap
Life insurance is being sold in India for over 60 years. It has been 16 years that the sector has been thrown open to private players. Still, life insurance is a "sell" and not a "buy" product in the country. Many believe it is only part of an investment portfolio. The domestic insurance sector has not matured enough compared with other developed nations and we still have a long way to go.
The popularity of self-opted and self-filled online applications clearly indicate a more serious approach by clients towards insurance. However, the same seriousness is not seen in offline applications. There appears to be a slightly casual approach. Like other investment applications, clients believe their job is done by just signing the application form without reading the form fully and filling it properly.
Be factually correct
An insurance form is not like a credit card form where you have to just give a few signatures and leave the rest to the bank. Insurance is a long-term contract between the client and the insurer. Unlike other consumer products, where the principle of caveat emptor (meaning let the buyer beware) applies, an insurance contract is a contract of uberrima fides,which means a contract of good faith.
Insurance is a peculiar contract, where the client is the only person who knows everything about himself - his actual occupation, income, health details, family history, insurance coverage details, habits, etc.
Hence, the insurer ideally does not have much personal information about a client and depends completely on the facts provided by the latter. The insurer fully trusts the information provided by the client and based on that issues a policy. So, in future, if the insurer finds any of the information materially incorrect, he can and ideally will repudiate the claim arising because of such false statements.
So, the impact is quite painful - not for the client because he is no longer there, but for the family, and the entire purpose of insurance is lost.
It's a myth that insurers want to reject claims to avoid payouts. This would not be true for majority of the life insurance companies since it affects their own reputation and brand. However, this does not mean that they will pay for wrong claims arising out of incorrect information intended at making undue gains from the policy.
An insurer would normally not repudiate a claim for minor miss-outs. Any information, which would affect the risk and policy issuance, should always be correctly and factually mentioned. Otherwise, the insurer is in his rights to repudiate the claim.
Medical tests must
Another major myth is you can avoid medical examinations and still get a policy. It's true medical examinations may require the clients to take some time out of their busy schedule and go for a health check-up.
But isn't it for your own good as a medical check-up will help you in the long run and that too at the cost of the insurer? Not all medical findings prompt the insurer to increase the cost of premium or reject a policy issuance.
Globally, insurance companies have scientifically defined underwriting norms based on appropriate mortality and morbidity statistics for all ailments and certain habits. Based on these guidelines, they shall give their final underwriting decision. Also, don't forget the insurance companies also want to be fairly competitive in their pricing. It is important that the client opts for an appropriate cover (5-10 times his gross annual income). It is simple to correctly and honestly declare all facts and go for the medical examinations, if asked for.
Let's now sum up the common mistakes that you should avoid while getting yourself an insurance.
• Not knowing the right purpose of the plan opted for
• Not opting for an adequate insurance cover
• Not giving complete information of certain habits such as smoking, alcohol, tobacco consumption
• Not giving complete or correct information about health issues or medical treatment undertaking or undertaken in the past
• Not providing correct family history
• Not providing proper details of income
• Not providing proper contact details, such as mobile number, email ID, complete address with landmark, pincode etc
• Not providing all supporting documents at one go, such as KYC and income proof documents etc
• Not checking the policy contract after receiving it. This is the most crucial miss out
Here's how you can overcome the mistakes and make the best out of an insurance policy.
• Get a proper need analysis done.Your insurance adviser shall assist you in this
• Based on your need, decide on the adequate insurance amount and the right plan at that stage
• If a medical examination is needed for a particular cover, go for it
• If a loading comes, find out about the details and make the payment.This will secure the family in the long run and the purpose of insurance shall be met.
• Ensure you provide all the correct facts
• If you get a call from the company for a pre/post verification, remember these are recorded lines and, hence, give the correct and complete information and respond properly to the questions
• Don't forget you have a free-look period in every insurance contract for you to go back to the insurer for any clarification or correction and if needed cancel the contract.
Follow the above and ensure complete peace of mind while securing your family's happiness.
The writer is senior vice-president, customer value management & head-underwriting & claims, Kotak Life Insurance