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Buying insurance? Know your rights first

October 19, 2017 08:08 IST

Buying insurance? Know your rights first

Naval Goel of PolicyX answers some important questions before buying insurance policies

Illustration: Dominic Xavier/Rediff.com

Although buying insurance of all kinds has become mandatory these days, there are still unanswered questions for the average consumer when understanding the intricacies of the policy rules and coverage.

Many insurance companies are trying their best to simplify the policy documentation by bringing more transparency to the products they offer and their pros and cons. 

It is, however, the duty of the customers to educate themselves about their rights and duties before buying an insurance policy.

The Insurance Regulatory and Development Authority of India (IRDA) has come out with specific responsibilities that the customer has before buying an insurance policy. 

They have also highlighted the general rights a policyholder has that need to be known. Knowing your rights is particularly useful during appeals when claims get rejected.

At the time of buying:

There are certain key points to remember when you decide to buy an insurance policy:

  • Do your homework on the company and the types of insurance policy as per your requirement
  • There are a variety of options with respect to the term of the policy -- choose a term, according to your personal needs, not because it is the most popular
  • Premium of the policy can also be varied with many inbuilt offers and options -- choose an amount that you can afford every installment to avoid policy lapse
  • Choose the installment frequency, such as monthly, quarterly, half-yearly or annually in accordance to your salary
  • The policy form is the basis of any insurance -- fill in the details truthfully and correctly
  • Never sign a blank or an incomplete proposal form or leave columns empty
  • Always register a nomination for your policy and fill their details correctly
  • Understand the difference between a Single Premium, Floating and Regular Premium
  • The new electronic payment system that is available with most insurers are convenient and safe besides having all your policy details available instantly
  • Understand that you are responsible for any and all elements of insurance contracts after you have signed it -- be specific and detailed about the risks that you need cover for and get the agent of the company to approve beforehand

After buying your policy:

  • Ideally, once your proposal is in order and submitted the insurance company will be in touch with you within a period of 15 days: If this does not happen, escalate the issue in writing
  • If and when your proposal is accepted, the insurance company will issue the policy bond within a rational amount of time: f this does not happen, immediately contact the insurance company
  • Comply if there are additional documents requested by the relevant insurance company with your policy
  • Always check all the details and covers that the policy provides when you receive the bond to avoid future misunderstandings -- bring to the notice of your agent and the insurance company of disagreements
  • Be thorough with the understanding of the entire policy, not just for immediate purpose, but throughout the tenure, during policy renewal, conditions of a policy lapse, coverage and jurisdictions -- make sure that all the points explained by the company official and understood by you are stated in writing
  • Never fear or put off calling the insurance intermediaries or the company directly for any clarifications and doubts regarding your policy at any given time

How to maintain your policy:

  • It is mandatory the premium is regularly paid on or before their due dates -- payment after the grace period will be subjected to late fees, policy lapse or other penalties
  • Enrol for the online payment methods that are quick and effortless -- waiting for the company representative to pick up payments personally is not an ideal solution when you want to pay on time
  • Intimate the insurance company of address changes, contact details or change of nominees as soon as the change happens -- putting off such vital information can cost you the policy itself

Registering nominations:

Nominations can be changed at any time during the policy period as per your convenience:

  • Formal letter stating the change of the nominee should be addressed to the insurance company
  • The insurance company will then register the name in their records and intimate the main policy holder
  • A minor can be appointed as a nominee provided an appointee is registered in order to receive claims that are paid when the nominee is still underage
  • It is mandatory that the nominee and the appointee in case of a minor signs the required documents correctly

Understanding policy lapses:

Conditions for a policy lapse is chiefly due to non-payments of premiums, but gather details of all the reasons from the agents or the company directly.

Handling policy lapse:

  • Write a letter formally to the insurance company directly if your policy lapses stating reasons and explanations
  • The company will issue a duplicate policy -- ensure that all the details are correct and as understood

Claim process:

  • Cooperate with your insurer by providing them with the details truthfully
  • Extend support to your insurer when there are third-party claims

Rights:

  • Insured have the right to withdraw or cancel their life insurance policy within 15 days of receipt of the policy bond
  • The policy can be returned stating the reasons for cancellation
  • The insured is entitled to a refund of the premium paid
  • The risk premium stated by the company for the tenure and expenses like medical examinations and stamp duty will be deducted before the refund
  • The insurer can buy back the unit linked insurance policy units at the market rate on the cancellation date

Unit linked insurance plans or ULIPs:

  • Partial withdrawal is possible
  • You can switch funds at any given time
  • Surrendering of the policy is allowed post the lock-in period, that is, from the date of commencement of the said policy
  • Nominee or the appointee registered under a life insurance policy has rights to the death claim
  • Alterations to your policy such as mode of payment of the premium, tenure of the policy, elevation in the sum assured
  • Redirection of the policy premium

Naval Goel is CEO and Founder, PolicyX.com

Naval Goel