Photo: iStock
Photo: iStock

Opinion | The final step before buying insurance

Before you switch off after buying insurance, read the policy kit carefully

Buying insurance, particularly term or health, can be an intense process. Forms are to be filled, KYC documents provided, medical tests undergone and payments made. So, when the insurer tells you that the insurance is done, most heave a sigh of relief, and file the insurance contract somewhere. Don’t do that. There is one final step before you can switch off and that is to read through the policy kit. The first page of the policy contract captures the most critical information of your insurance and if it is not correct, you run the risk of delays in claim payment or even claim rejection. Mistakes on this page do take place. These are mostly errors that can and should be corrected immediately.

In life and health insurance, check six details in the final policy documents thoroughly: personal information, nominees, illustrations, proposal form submitted, special endorsements and the insurance start date. This will take you all of five minutes but can save your family months of effort if a claim is made. Incorrect personal information, such as a misspelled name or date of birth, will require extensive documentation to correct when a claim is filed. If you are hospitalised they will compare details on your contract with your identity documents. Mismatches result in delayed approvals. A nominee should be correctly named and the relationship with you specified.

Read through the copy of your proposal form carefully. This has often been a bone of contention because most sign a blank form and leave it to an advisor to complete. In health insurance, your family and your own medical history must be accurate. Make sure you agree with the diseases listed as pre-existing by the insurer. A friend suffered from joint pain in one hand and the pre-existing diseases list excluded any orthopaedic conditions. In another case, someone with an injury in one eye had all eye-related matters excluded. These pre-existing conditions can be corrected when placing the insurance. Diseases that you have declared should be clearly listed in your proposal form. Recently, a friend realised that they had a fake policy issued by the salesperson because a declared cardiac ailment was not listed. While reading through the proposal form, look for inaccuracies even if they don’t seem important to you. An overstated income may be problematic because the insurer could question the amount of insurance you have. A family history of diabetes not listed in the proposal may be treated as material non-disclosure.

Read the life insurance illustration in your contract kit. You should have seen and signed this document before. This is the most reliable way to understand what you have bought. If you thought that you have bought a limited pay insurance but the illustration shows payments throughout the policy then that must be corrected. If a promised guarantee is not shown in the illustration it will not be paid.

Particularly in life insurance, there can be many special conditions under which the insurance is bought such as the Married Women’s Protection Act (MWPA) or keyman. MWPA ensures that your insurance cannot be attached against any liability you may have. This is used by business owners who give personal guarantees to ringfence their insurances. If your insurance does not have such an endorsement then you cannot protect it under the MWPA. Similarly, keyman insurance has to be marked as such if the claim amount is to be paid to the company instead of the employee.

The date when you first bought the insurance is most important. All waiting periods are calculated from this date onwards. In health insurance, the waiting period is when pre-existing diseases can be rejected. In life insurance, it marks the start of the three-year period after which a claim cannot be contested by the insurer. Sometimes the start date gets reset if you make any changes in the insurance or if there is a system change at the insurer.

Reading the first page of the contract is important in other insurances as well. In a home insurance, verify that the address is correct and your basement or terrace listed in the insurance. These can be reasons for claim rejection.

These checks must be done each year in annually renewable insurances such as health and home insurance. Changes from year to year do happen and you don’t want to be caught on the wrong side of this mistake.

Kapil Mehta is co-founder, www.securenow.in

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