Life insurance is a contract between an insurance policy holder and an insurer or assurer. In an event of death as per the contract insurer is bound to
pay a sum of money (Death Benefit) to policy holder’s legal nominee/beneficiary
against the premium amount paid by the policy holder. As per the process the
cost of insurance depends on the disclosure of facts by the policy holder at
the time of purchasing policy. Insurer evaluate all facts and accept the policy
accordingly.
We need to remember Life insurance is not a simple product like Fixed
Deposit in which term, rate of interest and maturity value all are written in a
single page. Insurance policies are relatively complicated. In our country
people are predominantly saving oriented. Even in a life insurance policy,
consumer is keener on maturity value rather than insurance benefits which
is actually main USP of a Life insurance product. Agents and company also focus
more on maturity rather than emphasizing on insurance benefits.
We must know that Life Insurance runs on concept of “Utmost Good Faith” ….in simple words it means…proper disclosure from both customer & insurance company.
Emphasizing too much on return on investment, consumer compromise on
declaration of his/her actual facts such as … Profession/ Income. / Phone number.
/ Email id. / Height / Weight. / Addiction habits such as smoker/alcoholic or not.
/ Preexisting illness. / Medical history etc. In case of eventuality customer
ends up getting a claim rejection by the company for suppression of facts. The
very purpose of buying a life insurance is to look after the financial loss of
our loved ones after death. The suppression of fact leads to claim rejection
despite premium payment.
Similarly, customer should also understand the exact feature, benefit
and exclusion criteria in each policy which he/she has decided to purchase. In
addition to this customer should also know the Premium paying term, Policy
Term, Bonus history, Bonus calculation, death benefit, rider benefits etc. well
before buying.
So, suggestion is, don’t buy a Insurance Policy just looking at maturity. It is not advisable to suppress facts. It’s very important, what Insurance provides
your family in your absence or permanent disability is more important than
Return on investment.
More you are truthful lesser is the
chance of claim rejection.
