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Life Insurance Policies & Unknown Clauses

Submitted by admin on June 13th, 2024

In India, emotion often overrides logic when it comes to making a policy-purchase decision. Due to the EMOTION factor, insurance is considered a PUSH product, rather than a PULL product. Most people are too emotional to make the right choice.

Life Insurance serves as a fountain of income for the breadwinner, ideally bought as a Term Life Insurance product. All life insurance companies offer Term Life Insurance products, with slight or significant variations in riders and clauses. This blog post will explain unknown clauses that you should know before buying a term life insurance plan.

If you are planning to buy a life insurance product, especially a Term Insurance Policy, go through the blog to know about some important clauses.

Disclosures: You must disclose accurate details of your health condition and your family’s health status. This includes illness history, on-going medication, and causes of your family members’ death (if applicable). Non-disclosure or inaccurate information is a common cause of claim rejection. Hence, you must declare and disclose everything accurately and in details when buying a policy.

If you have bought a policy without accurate and full disclosure, send an email to customer service requesting them to update information and keep a hard copy with your policy to avoid problems during claim settlement.

Misrepresentation: You must stay updated of the misrepresentation clause, including hobbies like adventure activities, harmful habits like smoking, alcohol addiction and drug abuse, and last but not the least, family history. When buying an insurance product, proper representation matters a lot.

Claim Settlement Ratio: Life insurance companies promote themselves with high claim settlement ratios, usually on the range from 97-99%. For new customers, it can be launched as a marketing gimmick.

The number of rejected claims and the breakdown between retail policy claims and group insurance are not taken into account. So, your decision is solely based on the claim settlement ratio.

Insurance Intelligence Bureau: IIB serves as a central repository of insurance products across insurers. The insured individual’s data is shared with IIB before a life insurance policy is issued in the person’s name. Applying with many insurance companies will reveal any misrepresentation. Hence, honesty is the best policy.

Female Factor: Daughters or spouses in many families, particularly business families, are shown as stakeholders or partners in the business despite being declared as non-earning members or housewives during insurance product purchase.

This is inaccurate declaration and can lead to outright claim rejection. These female members need a term cover if their income makes a significant contribution to the family’s wealth.

Critical Illness Rider: Always consider opting for a critical illness rider when buying term life insurance. However, you should understand that some policies differentially treat basic insured sum and critical illness rider.

Not understanding the afore-mentioned clauses can create many issues. Therefore, take time, read the clauses carefully and then make an informed purchase decision.

Final Words

Insurance companies have set a trend of passing the responsibilities to customers for declaration, disclosure and correct representation of income, health status, medical history, past illnesses, family members’ hobbies and death causes. Claim rejection is highly likely on the ground of inaccurate information.