Ask Mint | Make error in form, risk cancellation

Ask Mint | Make error in form, risk cancellation
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First Published: Tue, Dec 08 2009. 10 02 PM IST
Updated: Tue, Dec 08 2009. 10 02 PM IST
Can an insurer cancel my policy if he finds an error in the proposal form? Will I be given prior notice of such an event?
— Sankalp
An insurance policy is a contract issued on the basis of the information provided in the proposal form. It is issued with the presumption of “utmost good faith”, which implies complete honesty on the part of the insurer as well as the insured person in terms of disclosure of information.
If you notice an error in the proposal form, please inform the insurer at the earliest so that the necessary amendments can be made. Such amendments can also lead to an increase or decrease in premium. In case the insurer does find an error in the proposal form, a notice will be sent to you to make the necessary changes. Increase or decrease in the premium amount, if any, will also be notified to you. The policy can also be cancelled depending on the extent of misrepresentation of the facts.
I am a 30-year-old corporate executive and my monthly take home is Rs50,000. My wife earns Rs25,000 per month. We have just had a baby and I want to buy an insurance policy. Should I buy a child plan? How much cover do I need?
—Prashant Rai
Insurance should always be taken as per the need and human life value, which can be computed with the help of a financial planning tool. This is a calculator available on many insurance sites that helps you estimate your life insurance need on the basis of your current income, expenses, and future requirements, while keeping the expected rate of inflation in mind. Based on the information provided by you, I suggest you should have a comprehensive portfolio of protection and investment. You should have a term insurance cover and a unit-linked insurance plan (Ulip) or traditional policy, depending on your risk appetite.
You should also have a child plan. For all parents, children’s education is very important and it’s a commitment that has to be fulfilled whether one survives or not. A child plan is distinct from a regular plan as it provides benefits such as “waiver of premium” and “family income benefit” in case of death or accidental total disability of the counter life assured (parent). A child plan has the potential to build savings that can help meet expenses such as higher education and marriage, thereby securing your child’s immediate and future needs even when you are not around.
A term insurance would boost your protection as it will provide a corpus to the family in case the insured person dies.
Questions and views at feedback@livemint.com
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First Published: Tue, Dec 08 2009. 10 02 PM IST