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Taking care of your life insurance policy

Choosing to purchase a life insurance policy to protect one’s financial dreams and aspirations is a wise decision.



Sanjay Tripathy

Choosing to purchase a life insurance policy to protect one’s financial dreams and aspirations is a wise decision. It is important that the insurance is purchased according to financial needs.

Purchasing an insurance policy is not easy as one cannot understand all insurance products available in the market. As a buyer of life insurance, you have the right to understand the financial aspects for which a solution is proposed to you. Questions you need to ask while purchasing insurance are:

  • Why should I purchase life insurance?
  • What is covered under the plan and what is specifically excluded? When will the claim not be paid?
  • What is the process for purchasing life insurance? (life insurance purchase involves correct documents of medical and financial details and involves submission of documents to prove the eligibility for insurance)|
  • What is the premium to be paid? How long have I to pay the premium? What is the frequency and mode of payment allowed? What happens if I do not pay the premium in time? etc.
  • What is the claim process? To whom will the money be paid and the documents required for making claims?

IRDAI has made it compulsory for insurance companies to provide an illustration at the time of the sale. Ask your agent to explain the illustration and understand the various benefits available under the plan you are purchasing. You are entitled to see and understand the sales literature approved by IRDAI containing UIN (Unique Identification Number). Insist on sales literature and read the same while purchasing a life insurance policy.

Life insurance contract is a contract of utmost good faith, wherein it is your duty to inform the insurer of any medical or financial facts. Please read the proposal form after it has been completed and confirm that all answers are completed correctly and there is no false information in the proposal form. This is important as the claims will be payable only when utmost good faith is exercised while purchasing life insurance and there is no fraudulent intent in answering questions in the proposal form.

Once you receive the policy document you need to read the same and ensure that the policy document matches the cover sold to you. The following terms in the policy will help your understand your policy document better.

Free look-in period

In case you find that the general policy terms and conditions of the policy document do not match with the cover sold to you, you have the option of returning the policy document to your life insurance company stating the reason within 15 days from the date of receipt of the policy document. On receipt of your letter stating the reason for cancellation along with your policy document, the company shall arrange for return of the premium paid by you after deduction of charges as provided in IRDA regulations for protection of policyholder’s interest.

Personal details

It is critical that you check all the information provided by you is correct in your policy document. For example, your name, age, address and date of birth, etc. If you find any error, please inform your agent/customer service department of the company immediately.

Nominee

A nominee is the person designated by you (the policyholder) to receive the proceeds of an insurance policy, upon the death of the insured (policyholder) during the term of the policy. You can change the nominee during the policy term, and if you decide to do so, inform your life insurance company’s customer service department.

There is a process for change of nomination and you will be guided by the company to make a valid change of nomination.

Change in address/contact details

During the policy term, if there’s a change in your address, telephone number, email ids, you should inform your life insurer so that they update it in their records and you don’t face any problem during claim. Documentary evidence of the new address may be required for compliance with AML guidelines.

Fund performance/bonus

If you have invested in unit linked life insurance policy, you can track the performance of your funds. Every insurance company publishes unit prices on daily basis on their websites and periodically in business dailies. If you have invested in a traditional/conventional life insurance policy, you can check if the policy comes ‘with profit.’ If yes, you can ask your agent to inform you on yearly bonus declaration.

Fund switch/premium redirection

In unit linked insurance plan, you can move your accumulated funds from one fund to another anytime. You can also request for premium redirection for your future premium, into a different set of funds, as per your need. Some companies provide multiple free fund switches in a year. The difference between switch and premium redirection is that a switch enables shift in your existing units, whereas premium redirection enable you to change allocation for all the future premiums of your policy.

Grace period

Grace period is defined as the time period provided by life insurance companies to pay your premiums, if you have not paid your premium on your specified premium due date. Grace period may range from 15-30 days from the due date. Refer to the policy document for the days of grace allowed under the plan purchased by you.

Maturity and claims

Your policy would mature at the end of the policy term you have chosen and on your chosen retirement (vesting) date.

You can redeem your fund value along with sum assured, and other benefits as defined in your policy document. In case of unfortunate demise of the policyholder, the family members of the policyholder should contact the life insurer with the original policy document, claimant’s photo identity and address proof, copy of death certificate by local authority. The sum assured and other benefits are paid to the nominee mentioned in the policy document. It is important to keep the policy document safe.

The insurance cover that you bought is very valuable for you and your family. If the cover is lost by non-fulfilment of the policy conditions, then you may not be able to purchase a new cover at the same rates or you may not be eligible for insurance because of your health conditions. It is important to understand the terms and conditions of the cover and maintain the life cover to safeguard yourself and your family.

The author is senior Executive Vice-President — Marketing, Product, Digital and E-commerce, HDFC Life. The views expressed in this article are his own

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