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Life Insurance - For easier insurance claim, furnish correct information

26 Sep 2012

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Life insurance policies are contracts of utmost good faith and the life insured is required to accurately disclose information related to his state of health, income, occupation and any other material facts. In case of doubt as to whether a fact is material or not, the fact should be disclosed by the life insured.

The design of the premium for any product is defined by insurers based on certain mortality assumptions. Therefore, if a person represents a greater amount of risk, an appropriately higher premium needs to be charged for the coverage.

In order to establish the appropriate premium, underwriters in life insurance undertake risk assessment of the proposal based on the information provided. This information enables the underwriter to ascertain and classify the degree of risk represented by each proposed insured and make a decision on the acceptance of the proposal. The information that is used in the assessment process can be classified as follows:

1) Non medical and personal factors including occupation, income, nominee and relationship of the nominee to life insured, nature of duties, lifestyle, residential status, travel and avocation.

2) Existing insurance details to help evaluate the need for this cover vis a vis income.

3) Medical information including complete health status of the individual, family history and personal history on smoking and alcohol consumption.

All the above information assists the insurer in deciding whether the individual is insurable, determining the coverage amount, and the appropriate premium to be charged. Each question has its own significance and helps the company to evaluate and ensure that the proposal is priced in a fair manner.

It is always advisable to fill up the proposal form on your own or at the least go through all the responses before signing the application form. It is observed that there is a tendency to withhold information due to a false notion of proposals being declined or postponed due to disclosure. Disclosure of any medical condition does not imply that cover would necessarily be rejected. There are many medical conditions that can be considered at standard premium rates or at rated up premium. The same applies for proposed insured’s who have a higher than average occupation, avocation or residential risk.

Section 45 restricts the right of an insurance company to repudiate a death claim after a period of two years from the date on which policy was effected – only upon fulfillment of the three conditions mentioned in the section –misstatement on or suppression of material facts by the policyholder, which were fraudulently made or concealed by the policyholder and that the policyholder knew that the statement was false or knew that he was suppressing material facts.

However, within the period of two years, insurance companies can repudiate the death claim on the ground that any material fact in the proposal or accompanying document was inaccurate or false. All insurance companies follow the above principles and repudiate claims if there are any misstatements or non disclosures as described above and this has been upheld by various judicial verdicts. Omissions and wrong statements even if not made deliberately can lead to repudiation of a claim. Thus, furnishing true and complete information to the insurer at the time of buying the policy with all necessary support documents will ensure that the policy helps you and your family at the exact time of need. Hence, it is advisable that you personally fill the form, and with utmost honesty. After all, insurance is a contract based on utmost good faith!

(The writer is the chief operating officer at Bharti Axa Life Insurance)

Source: FC Research Bureau BACK

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