What To Look For In Your Insurance Contract
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. However, consumers need to develop a better understanding of the life insurance products that they buy.
There are a number of things that you must understand regarding your life insurance policy and this document is a guide to help you check the same.
Mentioned below are 10 key parameters to weigh once you receive the policy document.
Verify personal details
Personal data provided to the life insurance company forms a very important part for policy servicing and settlement of all claims.
Please make sure that all personal details such as your name, age, address, etc. are mentioned correctly.
Moreover, do be certain that all aspects related to personal habits or health details are mentioned correctly as per the disclosures made by you in the proposal form.
Analyze the benefits
The benefits of your life insurance policy must correspond with your long-term goals. After the receipt of policy document, go through the features and benefits 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.
Check the riders
In addition to life coverage, you may have purchased add-on covers known as "riders" for other types of contingencies. Go through the insurance contract to understand the rider coverage.
Consider the payment tenure
Please check for how long you need to pay premiums and also what mode of payment you may have chosen, for example half yearly, quarterly, annual, etc.
You may sometime get a wrong advice like "you need to pay for only 3/5 years". Please do not fall for such advice. Life insurance is a long-term savings and protection tool and its benefits can be seen only if one buys it for the long-term.
Authenticate the returns
Do not blindly believe the returns promised. Once you get the policy document, check out the benefit illustrations of returns.
The illustration shows what would be your illustrative benefits in a hypothetical situation if your investment were to provide a gross return of 6% and 10%, as per the IRDA's mandate. Study carefully what is guaranteed and what is not.
Comb through the policy contract
In addition to the benefits specified in policy documents, it is necessary to carefully read the terms and conditions of the policy. In case you find any difficulty in understanding any aspect of terms and conditions, please check with the life insurer the impact of those terms and conditions.
Confirm surrender charges
Very rarely, a situation may arise where you face a cash crunch and need to surrender your policy or make partial withdrawals. For times like these, make sure to examine the exact surrender charges mentioned in the policy document, so that you can plan finances and minimize losses accordingly.
Exclusions in the policy define aspects or situations that will not be included in the coverage. An exclusion that one is not aware of can make the cover redundant.
Read the exclusions carefully. These may include suicide, death which occurs during the commission of a crime, acts of war or terrorism, death due to a natural calamity, etc. Some exclusion may be only for a specified period and may be called restrictions instead.
Claims settlement process
Check if the nominee's details are captured correctly. You have the option of including one or more nominees and specify their share of claim. The policy should also list down all details on how to file a claim.
What to do when you think a life insurance policy has been mis-sold
The life insurers provide a free-look period of 15 days to the policyholder during which a policyholder can review the policy document and if he/she is not satisfied, then he/she is free to return the policy and claim refund of the premium paid post deduction of applicable charges.
IRDA has also set-up various Ombudsmen offices across the country, which can take up policyholder grievance and complaints.