Life insurance is the only financial tool which offers the triple advantage of risk coverage, long term savings and tax benefit. It offers financial protection to an individual after taking into account the present and future value of his assets and liabilities. Even as the awareness and acceptance of insurance in India is growing, consumers need to develop a better understanding of the products they buy.
A life insurance policy should spell out terms clearly, and the insurance document is a complete guide to what the insurance contract covers. Therefore, one should make sure that everything that one requested in the policy be incorporated in writing.
There are 10 items to be checked and understood, once the policy document is received. Let us examine them:
Verify Personal Details
Personal data provided to the insurance company is the basis for settlement of all claims. One needs to verify that personal details such as name, age, etc. are mentioned correctly. Further, one needs to check that all aspects related to personal habits or health details are mentioned correctly and honestly. In cases where it is not declared or is erroneous on policy documents, the insurer in all fairness may refuse to honour the claim. Hence it is necessary to get it corrected proactively.
Analyze the Benefits
The benefits of your life insurance policy must correspond with your long term goals. After the receipt of policy documents, go through the features of the product and check if they match with promises made during the purchase. Cross-check features such as sum assured, premium amount, flexibility of the plan, etc. Your insurance plan may also come with more evolved features such as dynamic fund allocation or increasing premium to beat inflation which need to be understood in detail as well.
Check the Riders
In addition to life coverage, you may have purchased a few add-on covers known as riders for other types of contingencies. Go through the insurance contract to ensure that riders you bought are included.
Knowing the exact payment tenure will help in ensuring that you achieve the goals for the reason you bought the policy. Check for how long you need to pay premiums and what mode you may have chosen, such as quarterly, half yearly etc. Most of the mis-selling happens with the premium payment tenure. It is a long term savings and protection tool and its benefits can be seen only if bought for the long-term.
Do not blindly believe the returns promised. Once you get the policy documents, check out the benefit illustrations of returns. Study carefully what is guaranteed and what is not. The benefit illustration shows what illustrative benefits would be in a hypothetical situation if your investment were to provide a gross return of 6-10 per cent, as per the IRDA's mandate.
Terms and Conditions
It is necessary to read the terms and conditions of the service contract carefully. In case you find any difficulty in understanding any aspect, please check with the insurer.
A situation may arise where you face a cash crunch and need to surrender your policy or make partial withdrawals. For unseen eventualities like these you will need to examine the exact surrender charges mentioned in the documents you sign, so that you can plan finances and minimize losses.
Exclusions define situations not covered by the policy. An exclusion that one is not aware of can make the cover redundant. Read the exclusions carefully. Some may be only for a specified period, and may be called restrictions. It is common for many policies to refuse to cover certain types of deaths within a specific period of the policy being issued.
Claim Settlement Process
Check if the nominee's details are captured properly. You have the option of including two or more nominees and specify their share of claim. Your life insurance policies should include everything that is supposed to be in your coverage, and it will spell out exactly your responsibilities, that of the insurer, what you are covered for and for how much, and other aspects of your life insurance coverage. It should also list down all details on how to file a claim or what to do in certain other circumstances.
In Case of Mis-selling
The life insurers give a 'free look' period of 15 days to the consumer during which the policy can be reviewed from the needs perspective. If the consumer is not satisfied and feels that the product features are not in sync with the understanding given by the agent at the time of selling, then he is free to return the policy and claim a refund. The IRDA has also created various ombudsmen across the country, which act as grievance cells and can take up consumer complaints.