Don’t do these mistakes while filling your insurance proposal form

Don’t do these mistakes while filling your insurance proposal form

Knowledge Hub

Case 1(Health Insurance): Mr. Policy Holder met with an accident and admitted to hospital for treatment. After he got discharged from the hospital he claimed the hospital expenses from his insurer. To his surprise he received a letter from the TPA of insurer mentioning policyholder is suffering from hypertension and asked to submit the papers related to the treatment he is taking for hypertension.

Case 2 (Life Insurance): Policyholder died within 2 years of taking the life insurance policy and the nominee claimed the death benefits in the policy taken on the name of diseased. After some time instead of claim amount claimant receive the rejection of claim letter from the insurer mentioning that “policyholder did not disclose the policy taken last year(before the policy in which benefit is claimed) of SA Rs. 500000 from same insurer and same agent in the proposal forms at the time of taking the new policy”

You might have come across such case and might have thought that insurer is not willing to pay the claim amount and deliberately repudiating the claim or unnecessary calling the requirement to settle the claim.

But, do you know that amongst the various principles on which insurance business work, one of them is “Principle of Utmost Good Faith”.

Utmost good faith is a common law principle (sometimes called Uberrimae Fidei). The principle means that every person who enters into a contract of insurance has a legal obligation to act with utmost good faith towards the company offering the insurance. A person must, therefore, always be honest and accurate in the information they give to the insurance company. The insurance company also has a responsibility to act in good faith in all its dealings with the insured.

An insurer has every right to question the life assured or claimant up to a specific period of time (Sec 45 of Insurance Act 45) if it can prove that information not disclosed was material and would have changed the underwriting decision of the insurer.

In the case 1, the policyholder has hypertension and it was disclosed while he was under treatment for the accident, but he did not mention it in the proposal form while taking the policy, if disclosed insurer would have declined the proposal or would have charged an extra premium due to higher morbidity. If he did not know or did not had hypertension before he must produce the proper treatment papers to TPA showing the dates after taking the policy and medication prescribed by the doctor.

In the Case 2, policyholder did not disclose the policy taken from the same insurer and thus clearly affected the underwriting of the insurers. Underwriting is totally depending upon the age and sum assured proposed in the recent proposal and taken within two years of the recent proposal with the same insurer. If policy holder had disclosed the previous policy, the insurer would have called for medical examinations before accepting the proposal and the underwriting decision might have changed.

In both the cases, carelessness or ignorance led to the call for additional information in the first case and delay of the decision and in second case rejection of the claim.

Therefore a person proposing a new insurance policy must keep in mind following things while filling out the proposal form.

  1. Always disclose your current health conditions in the proposal form. If you have been admitted to hospital for treatment for any reason, you should mention it in the proposal at the proper place.
  2. Please mention the clear reason of death in your family (if any) in the family history details because some deceases are hereditary and thus underwriting decisions are affected.
  3. Always mention correct height and weight in the proposal form if the policy is issued without any medical examination. BMI normally higher than 29 attracts extra premium due to higher mortality rates.
  4. If you are taking two or more policies simultaneously on your name with the same insurer and filling different proposals for the same, please mention the details regarding other proposed plan in all the proposals, as the total sum proposed will be much higher and may require some medical examination according to the underwriting principles of the insurer.
  5. Always write all the previous policies taken from same insurer and another insurer too, as it will affect the financial underwriting of your proposal and medical underwriting if taken within a specified period of current proposal (Time will be different according to underwriting principle of insurer)
  6. Clearly, mention if you are a politically exposed Person (PEP as per RBI guideline) or having any hobbies which include any hazardous activities like, Para selling, paragliding, rock climbing, river rafting etc.
  7. Clearly, mention exact nature of your job/service as some job may attract extra premium like aviation etc.
  8. There are many questions related to your health and previous ailment, you must carefully read every question then give an answer to those questions.
  9. In the case of female proposers clearly mention the date of last delivery, last menstrual date, and any cesarean section or miscarriage happened before the proposal date.
  10. Never do any overwriting in proposal form at any place.
  11. Always sign the proposal after reading every question and answer written against it if not filled by you with date and place of signing.
  12. Keep a copy of the proposal with you for future reference.
  13. Ask for the literature of the policy you are taking from the agent and keep it along with the copy of proposal form.
  14. Provide clear copies of Age proof and KYC documents along with the proposal and always self-attest each document with the reason of giving the document like “for taking new policy “plan/term” from “name of insurer”.

You must know that any question asked in proposal form is important and are material facts for the insurer (that is why those questions are included in the proposal form). Insurance is a legal contract and both insurer and life assured are bound to disclose correct information to one another, if not the contract will become void.  Whether policy issued after a medical examination or not you must answer all the questions with “Utmost Good Faith” so that your nominee or loved ones do not have to face any problem while making claim in case of any unforeseen circumstances.


Proposal Form: Basis of your insurance contract

Proposal Form: Basis of your insurance contract

General Insurance, Knowledge Hub, Life Insurance

Insurance is a contract between insurance company and the person want to cover future risk on his life, where the insurer is bound to pay a fixed amount on death of the Life Assured to his nominee in return of premium (one time or regular). This contract starts when insurer accepts the proposal from the proposer on the basis of the details furnished by the proposer in the proposal form (A prescribed format for proposing a life insurance contract).

And since the insurance is based on the principle of Utmost good faith, it means that the customer seeking the insurance must disclose all the personal details (health as well as financial or which ever asked in proposal form). Therefore filling the proposal form correctly is very important, otherwise, can lead to the repudiation of your claim.

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Important information to be furnished in Proposal Form

There are some fixed points which are included in the proposal form of all the insurance companies which has to be filled very carefully and which are as follows:
  • Name: It’s obvious, isn’t it? Always right your name by yourself (Agent can misspell your name) and keep it in BLOCK letter so that it can be read easily. Though proposal form will also ask your father’s name in a separate column but write it with your name. Be sure that you give the exact name as it is in your bank account. Avoid any over writing at any place, especially in your name and if it happens any how just change the proposal form and use fresh one (Don’t hesitate to ask for new proposal form from you agent) to avoid any future problems.
  • Address: Normally you will have to give both current and permanent address, but people give their current residential address and write “same as current address” in permanent address column even if it is not. Make sure to provide both addresses if different. Provide full address with pin code so that all the correspondence from your insurer reaches you in time.
  • Contact No. and Email ID:  These are the fastest way of communication these days, so if you are in a transferable job then provide one permanent contact number which you will use always even if transferred, but also provide your email id because they will not change even if your shift abroad (May be I am wrong, reader’s discretion needed).
  • Date of birth (DOB): Your insurance premium will be based on your age, so write your DOB correctly with supporting documents. Always try to give your School certificate or passport or birth certificate (if life assured is child) as your supporting document as these are considered standard age proof, other documents can also be use as your age proof but with restrictions in Sum assured and term like driving license, PAN card, some age proof like voter card, Adhar card, and  self-declaration will attract extra premium.
  • Nationality: Its very important because many insurers don’t provide life cover to NRI’s (in Indian perspective) living in specific countries, so be sure to provide correct information, and don’t hide that you are an NRI just to take insurance because it can lead to repudiation of your claim to your nominee if any thing happens to you outside India, But don’t panic if you are a resident, then you can roam anywhere without hesitation.
  • Plan and term: Its the scheme you wanted to take, write plan name  and term carefully, without over writing, and thoroughly go through the condition of the plan you want to take before proposing the same.
  • Nominee: Nominee is the person or persons who will receive the claim amount after you. Choose the right nominee in your insurance contract. Write correct and full name of your nominee as in his/her bank account. Write the name in BLOCK letter to avoid any misreading. Give correct age and relation. If in any case your nominee is minor then your have to provide the name of an appointee who is a major person who will take the claim amount of behalf of nominee until he/she is minor, else nominee will receive the claim if he/she became major. Though you are free to make anyone your nominee but making the nominee other than your legal heirs and blood relative could be seen as a Moral Hazard by your insurer and can deny you the insurance( Depend on upon the underwriting principles and guidelines of insurance company). It must be kept in mind that making anyone nominee doesn’t mean that money is for him/her, at any point of time legal heir of the Life assured can claim their right over that money.
  • Occupation, Income, and Education: The maximum life cover you can have to depend on upon your Income, so give right income. You have to give supporting of your income(ITR or CA certificate) with your PAN card no. if your annual premium is higher than 50K (Again in Indian perspective). Insurance cover also depends upon the nature of your occupation, if its too hazardous like aviation, army,  police or other force jobs, mining (Under ground work) etc. then they will attract some extra loading on your premium (Purely depend on the underwriting criteria decided by the insurer). Always give the correct name of your employer if employed/salaried, because insurance companies give quite high risk cover to persons employed in Govt/PSU or reputed firms (where leave details are maintained by employer) without any medical examination. Provide correct details of education level, its very important in the case of female proposer because in India for females, different education level means different risk criteria.

  • Heath details: Now these are the details which should be written carefully without any overwriting and only after reading the question asked, I have seen agents filling the form by themselves without asking anything from customer, so if it happens to you, just read the questions and their answers before signing the proposal form (But take a little headache and fill the form by yourself). Companies provide the insurance even if you are suffering some specific diseases/health problems, but only after medical examination and with some extra premium. So don’t hide anything related to your health or details related to any admission in the hospital for treatment, because you won’t suffer, it will be your spouse and children after your demise if your insurer rejects the claim based on your past health history. If the proposer is a female then provide correct details of your last menstrual date and last delivery date if asked in the proposal form.
  • Family History: Details about the age and health status of your parents, siblings, spouse and children. Give correct age and their health status and if anyone had already died then give the exact reason of death, because many diseases are hereditary. Two or more early deaths(especially by disease or suicide) in your family can be seen as a higher risk on your life
  • Other policy details: Provide all your other policy details with the same or other insurer, policy details from same insurer will help the insurer to estimate their own risk on your life since policy taken within two-year are added with your proposed risk and medical examination and any special reports  and underwriting decision will depend upon the cumulative risk in all the policies taken from same insurer within two year. Policies from other insurer are required for financial underwriting, means are you capable of depositing the cumulative premium in all policies from your given income? If the proposer is a female and if married then provide policy details of your husband too. If life assured is a child then provide all policy details of parents in the proposal form.
  • Signature and date: Sign the proposal form at the appropriate place after carefully filling the proposal form and if filled by other person or agent then read all the details carefully before signing it. Give place of signing and date on which you are signing the proposal form. Since insurance, a long-term contract so use the sign which you use always in future. Many companies provide the scanned image of your proposal form with policy bond, ask your agent about it and if not provide keep on a photocopy of your proposal form with you.
So its a legal document read it carefully, fill it clearly and sign it sensibly because it will always be your basis of the contract with an insurer, and you don’t want that your nominee will be denied for any claim in future.
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Nomination in a Life Insurance policy

Nomination in a Life Insurance policy

Knowledge Hub, Life Insurance

Nomination is a right conferred by the section 39 of the Insurance Act 1938, on the “holder of a policy of life assurance on his own life” to appoint a person/s to receive the policy moneys in the event of the policy becoming a claim by the assured’s death. The term “holder of a policy” ordinarily means a proposer or life assured or an absolute Assignee who has right, title & interest in the policy. But if the holder of the policy is not life assured himself, he cannot effect a valid nomination under the policy. In other words, if holder of the policy is life assured, then only he can effect valid nomination under the policy. In other cases, where proposer and life assured are different persons i.e. policies taken during minority of life assured OR policies taken by father on major child, nomination is not allowed. In case policy is absolutely assigned in favour of assignee, though he is a holder of the policy, Assignee cannot effect valid nomination under the policy. This is because, he is not life assured under the policy.