Jyoti Thakur (name changed) was shocked on being told that her claim to her late husband’s life insurance policy had been rejected. The insurance company had, in a detailed letter, explained how her husband had failed to disclose necessary information while buying the insurance policy. This is not the first instance of claim rejection due to erroneous disclosure or hiding relevant information while taking a policy. In a recent report, the Insurance Regulatory and Development Authority of India (Irdai) had published data of claim settlement ratio submitted by various life insurers companies. The companies said most claims get repudiated due to non-disclosure of health conditions, misleading details of income and occupation and withholding of insurance with other companies prior to applying for the policy.
Correct details in proposal form
People insure themselves or their loved ones to ensure availability of adequate funds in case of sudden death of the insured having financial responsibilities. The provisions of insurance work like any other contract; albeit, it must be done in utmost good faith. For this, the insured person is required to disclose any potential matter that may influence the insurer’s decision to accept the risk of loss.
The information submitted in the proposal form is the basis of contract between the insurance company and the insured, and it determines if the former is liable to pay the mutually consented amount to the nominee in case of death of the life insured. The amount of payment varies according to the terms stated in the contract and the premium paid (single payment or in instalments). Those seeking any kind of life insurance must ensure that they fill in accurate name (of both the insured and the nominees), correct mailing address and other contact details such as phone number and email id, pre-existing diseases, etc.
To avoid any possibility of dismissal of insurance claim, the insured must fill in correct details regarding:
Occupation and income: The maximum life cover allowed by any insurance company depends on the level of income, thus, necessitating the insured to provide right details of his/her income. Authenticity of income details may be determined by submission of last pay slip along with the Income Tax Return (ITR) filed. For those employed in risky occupations including aviation, army, police, defence services or mining jobs, giving information about the nature of job is especially important as the underwriting criteria decided by the insurer requires an added load to the premium paid.
Details of health: Insurance proposers tend to avoid filling details regarding health conditions fearing that information on any ailments may result in the insurer rejecting the contract or asking for a higher premium. It must be understood that insurance companies do not deny any scope for insurance to those afflicted with specific diseases or health troubles, but only after a proper and detailed medical examination along with extra premium.
History of illnesses in the family: Details of correct age along with health details of family members are important owing to the hereditary nature of certain diseases. Two or more people in the family succumbing to some specific illness that may be genetic in nature or exhibiting suicidal tendencies indicates a higher risk of death of those insured, and hence, attract higher premiums.
Taking a life insurance policy in the age of uncertainty is a way to show your loved ones that you care. Since the process involves underwriting a legal contract, it is necessary that extreme caution is taken while filling out the form. This will ensure timely and complete payment of the claim to the nominee.
The writer is head of life insurance, Policybazaar.com