When was the last time you read a product manual before operating your new electronic gadget, used a road map to reach some place, or filled a complete application form by yourself? Hard to remember, right?
People justify this act of laziness in different ways - some call it the complexity of fine print, some want to make use of the free labour, and some put all their faith in the agent or salesperson.
The story is no different when it comes to reading an insurance brochure or filling up an insurance application form.
We presume that the other person (insurance agent, broker, or the sales executive) can fill our application form better than we can, as they are used to the activity. Referred to as "conscious ignorance," very few people bother to diligently go through the form.
There are question in the medical form that your agent cannot answer for you. In most cases, for questions such as 'whether the applicant smoke' or 'consumes alcohol', the agent ticks on the "no" option. They also fill the questions on medical history on presumptions.
There are cases when the agent asks the applicant to deliberately hide information, as it may increase the premium.
This ignorance or non-disclosure
In all proposal form, there is a disclaimer referring to Section 45 of Insurance Act 1938. It states that if the insurance company gets to know that there has been a non-disclosure or misrepresentation of material facts in the application form, then it can call the policy null and void.
It simply means that within two years of commencement of the policy, if the insurance company finds out that the policyholder has not stated the complete truth or has lied while filling up the proposal form for commencement or revival of the policy, then it can cancel the policy and decline the claim.
Thus, if a smoker had mentioned that he is a non-smoker and he dies even a natural death within 2 years of the policy commencement, the insurance company will reject the claim on grounds of "non-disclosure" or "misrepresentation".
If you are planning to take an insurance, do make it point to fill the form yourself and disclose all information correctly or best to your knowledge. It is not only you who have to bear the brunt of the ignorance but also your family.
The author is CEO of MyInsuranceClub.com, a price and features comparison website for insurance products in India. You can reach him at deepak@myinsuranceclub.com
