Why reading your insurance policy is important ::Business Line

If you disagree with any of the terms and conditions of your policy, you can return it within 15 days of receipt, stating the reasons for disagreement.

The first thing a life policyholder should do when the policy bond reaches him is to read the policy fully. All insurers advise the customer to read the policy and check the details therein and, should he find a mistake or error in it, to get it corrected immediately. A small lapse at this stage can create problems later.

Let us take the case of a policyholder who paid premiums through salary deductions. He called on the insurer to get his name corrected on the maturity claim cheque. He had hardly ever taken out his policy bond from its envelope in twenty five years, and had not noticed the error even while submitting it to the insurer along with the maturity claim papers.

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The cheque carried the name as it appeared on the policy bond. The insurer expressed his helplessness; no correction could be done as the policy had matured and the contract period was over.

A customer should read his life insurance policy mainly for three reasons. One, to check whether he has received the policy he desired. Two, to confirm that the policy that has reached him pertains to the product of his choice, and to be reminded of its main and rider benefits and other details such as how long to pay the premium, the mode of payment, the ancillary benefits etc. Third, to know what the restrictive conditions on the benefits are and the situations in which benefits may not be paid.

FREE LOOK

The IRDA (Protection of policyholders' interests) regulations provide that a customer can go through his policy and return it within 15 days of the receipt of the policy document, if he disagrees with any of its terms and conditions, stating the reasons for his disagreement. He shall be entitled to a refund of premium paid, subject to deduction of proportionate risk premium. A refund of premium means recovery of commission paid to the salesman. This right given to the customer is a safety valve against wrong selling by unscrupulous salesmen. Unless the customer reads the policy, how can he make use of this provision?

DISAGREEING WITH TERMS

Let us see a couple of cases where the customer did ‘disagree with the terms and conditions'. Upon solicitation from a salesman, a certain customer agreed to purchase an annuity plan of a life insurer. The customer signed the forms. When the policy reached him, he found that it was a unit-linked insurance policy that had nothing to do with annuity.

Moreover, he had paid Rs 1 lakh as a single premium, but the policy document showed the mode of payment of premium as ‘annual'. From the copy of the proposal papers given by the insurer, the customer found that some changes had been made in the ‘Plan and Term' and ‘mode of premium' columns, which could have gone undetected, had he not been careful. In another case, the salesman motivated the prospect to invest Rs 10 lakh as single premium in a unit-linked insurance policy assuring him, that whenever needed, he could raise a loan on the policy. Shortly afterwards, the customer wanted to send his son abroad for higher education and he applied for a loan as soon as he received the policy. No loan was available on the policy.

The insurance executive advised him over telephone to raise a loan from a bank on the strength of the policy. The bank showed him the policy condition which stated that the policy could not be assigned. The customer then applied for a refund of premium under the ‘free look' condition.

Where a customer does not get a copy of his proposal papers he can apply to the insurer under section 51 of the Insurance Act, 1938, (supply of copies of proposals and medical reports) – which mandates the supply of certified copies of such papers, ‘on application by a policyholder and on payment of a fee not exceeding one rupee.' Copies of proposal received must be preserved along with the policy for use on a later date, in case of a repudiation of claim. The answers and statements therein may come to the aid of the claimant.