Know Your Rights and Duties Before Buying a Life Insurance Policy

January 13, 2022 Mutual Fund

People usually spend a lot of time choosing the right Life Insurance Policy by comparing the features and benefits of the different policies available, which is definitely a crucial step. However, they fail to make the most of their insurance policies because they are unaware of the several other aspects of the Life Insurance Policy that are equally important. Therefore, in order to maximise the advantages of your life insurance policy, it is advisable to know your rights and duties as an insured before you buy the policy.

Here are your duties as the insured before buying a Life Insurance Policy:

1. Never sign on a blank proposal form or leave any column blank; you must fill the life insurance proposal form yourself. If you conceal critical details and/or provide misleading personal information, it may lead to your application being rejected, a policy cancellation, or a claim rejection. Hence, you need to make sure all the information you provide is accurate and factual.

2. Select a premium amount that you can easily pay for the term you have chosen and a suitable premium paying method from Single Pay or Regular Pay. Remember, your policy can lapse if you fail to pay the premium on time. You have the option of choosing a suitable premium paying frequency, such as annually, half-yearly, quarterly, or monthly. For the convenience of paying your premiums on time, it is advisable to opt for the Electronic Clearing System (ECS) facility.

3. In case of the unfortunate demise of the policyholder, the sum assured is offered to the nominee of the policy. Hence, it is essential to provide the correct nominee details, such as the name of the nominee, date of birth, address, contact number, etc.

4. You should provide all your communication details, such as an address, contact number, email address, etc. correctly. Furthermore, in case of a change in your personal details, you should immediately update it with the insurer.

Here are your duties as the insured after you buy the Life Insurance Policy:

1. After submitting the proposal form, if the insurer asks for any additional documents, it is your duty to provide them. Failing to submit the required documents may result in application rejection.

2. If you do not receive any communication from the insurer within 15 days, you should contact the insurance company, preferably in writing. You can raise a complaint if you do not receive the policy documents within the time specified by the insurer.

3. After receiving the policy documents, make sure you thoroughly read all the terms and conditions and confirm that it is the same policy you intended to buy. Ensure that it does not have any hidden terms you might not agree to.

4. If you have any doubts about the policy or do not understand any terms, inquire with the insurer.

5. In case you have received a wrong policy, and the features or terms and conditions do not match with what the insurance agent or insurer explained to you, immediately contact the insurance company.

Here are your duties as an insured during the policy period:

1. Make sure to pay your premiums on time, as not doing so will lead to a policy lapse and the beneficiary will not be able to make claim against it.

2. Like we mentioned earlier, in case of a change of address, contact number, email address, etc., make sure you immediately update the insurance company.

3. If you wish to change the nominee, you should get the details of the new nominee updated with the insurer by submitting a 'Change of Nominee Form'.

4. In case of a loss of a policy document, immediately inform the insurer and request a duplicate policy, which can be used for future reference.

5. You must comply with all the necessary requirements of the insurer at the time of processing the claim.

Here are your rights as the insured:

1. Before buying the policy, you have the right to receive all the information related to the proposed policy. As per the Insurance Regulatory and Development Authority of India (IRDAI), you can ask any type of information (related to the policy) to the insurance provider and they must provide it.

2. After receiving the Life Insurance Policy, if you do not agree with certain terms and conditions, or if the policy is not in accordance with what was explained to you by the insurance agent at the time of purchasing the policy, you have a right to cancel it within 15 days of the free-look period offered by the insurance company.

3. Your rights when cancelling the policy within a free-look period are as follows:

   • Within the free-look period, you can return/cancel the policy stating the reasons for the objection.

   • You will be entitled to a refund of the paid premium.

   • A proportionate risk premium for the period you were covered and the expenses the insurance provider has incurred on medical examination and stamp duty charges will be deducted before proceeding with the refund.

4. In the case of a Unit-Linked Insurance Policy (ULIP), here are your rights:

   • The insurance provider has to purchase the units at the price on the cancellation date.

   • You can partially withdraw a certain amount of the policy.

   • You can switch the funds.

   • You can surrender the policy after the lock-in period from the date of commencement of the policy.

   • The nominee has a right to the death claim amount.

5. You can make the following changes anytime:

   – Change the term of the policy

   – Increase the sum assured

   – Change the mode of premium payment

   – Premium redirection

6. In case the services of your insurance company are unsatisfactory, you can file a complaint against them. Here's how you can make a complaint against an insurance company.

To Conclude:

Since there are a plethora of life insurance policies available in the market, it is your right and duty to get all the information you need before buying the life insurance policy. Knowing your rights and duties will not only help you make an informed decision at the time of buying the policy, but it will also help you get the most out of your existing insurance policy.

This article first appeared on PersonalFN here