Dos and don'ts when buying insurance

If you are an insurance policyholder, chances are high that you would have received an email or SMS, which goes something like: “Beware of calls and letters offering high rewards and bonus on your insurance policy in the name of IRDAI and other companies.” This is a frequent message one receives these days and it is loud and clear—you need to be careful once you become a policyholder. Furthermore, it is in your good interest that you practice similar rigour at the time of buying an insurance policy.

In their effort to differentiate, insurers have created numerous insurance policies that seem similar, but on close examination, no two policies are actually comparable in all aspects, making it extremely challenging at the time of zeroing down on a policy. Yet, most insurance buyers zero in on a policy by looking at the premium they need to pay, and many actually stop there. Whereas, the right way to buy a policy is to first analyse if you need it based on the scope of its cover and features before looking at the costs, which is nothing but the premium one has to pay.

Furnishing details

When taking insurance of any type, the application form seeks several details. Many of these details are simple to understand and fill, but there are some details that require you to think before responding. For instance, it is common to come across

details on family members with health conditions in case of both life and health insurance. Not sharing these details with the insurer can be construed as suppressing facts at the time of claim, when you need the insurance the most.

Says Tapan Singhel, MD and CEO, Bajaj Allianz General Insurance: “The need of the hour in the industry is simple, dejargonised products that can be easily bought via online or mobile platforms.”

While more often than not, life policies are easy to understand and fill, general insurance policies, especially health plans, can pose a daunting task. The time consumed when filling insurance forms is not just challenging, it leads to instances when one misses on sharing details that later come back to haunt. Make sure that you take time filling up these forms, even if it takes a few days to do so, than hurry up and leave it with loopholes which, when interpreted by the insurer, go against you. “The proposal form should be filled correctly to the best of your knowledge without hiding any relevant information. Not disclosing material facts may lead to cancellation of policy and repudiation of claim,” explains Dr A.K. Saxena, CMD, Oriental Insurance.

Even at the time of raising a claim, the documentation needs to be complete. “In order to get treatment at any network hospital, the policyholder will have to fill up the prescribed claim form and present it to the hospital with the TPA identity card,” explains, Steve Hollow, deputy CEO, SBI General Insurance. However, in case of reimbursement, which mostly arises when treatment is taken at a non-network hospital, the paper work seeks a lot more details, which should be submitted without any gaps.

The online curse

These days, one frequently comes across web pages that do not have a link to an insurance company’s website or a broker’s site to buy insurance. The appeal of low insurance premiums is too strong, but comparisons are most often not in an easy-to-understand format. Moreover, we are not yet in a situation where a policy is sold entirely online. There is an element of offline interaction needed to get the policy purchase processed. Be careful, because many a times offline interaction with the insurer or the broker may involve some additional policy details being filled in or sought than what are needed.

“I was shocked when an insurance broker landed at my house to collect some documents and a cheque, and asked if my medical evaluation was

done,” recounts, Delhi-based Suresh Gogia. At 25, Gogia was taking a high-value term insurance plan to hedge against a home loan he had taken. The experience left him distraught and he swears by the old insurance agent route when it comes to buying insurance over buying it online. Moreover, if you have registered yourself on any insurance broking website, be ready to face the nuisance of calls soliciting insurance sales at any hour of the day.

Post-claim blues

Bengaluru-based, Nipun OS, aged-33, encountered an insurance claim on his Ford Figo after an auto rickshaw scratched one side of his car, damaging both the doors and more. “The total repair cost came to around Rs.50, 000 out of which the insurer paid Rs.40, 000. I had to bear the cost of consumables like screws, because it was excluded in the policy,” he recounts.

But, the real surprise came at the time of renewing his policy the next year. “The premium increased by 10 per cent because of the claim, with the no-claim bonus not being extended.” In case of health and motor insurance claims, insurers are known to increase the premiums in the subsequent year. In fact, insurers also have the right to refuse insurance if they find a policyholder to be a frequent claimant.

Timely renewals

The most important factor to keep an insurance policy on track is to make timely premium payments. Although there is grace period available on premium payments and also special windows available to revive a policy that has lapsed, make sure you are on time when it comes to paying premiums. “Renewal should be done at regular intervals without any break in the policy, as after a break any policy that you buy will be considered as a fresh one and the benefits of continuity will be lost,” cautions Saxena. Remember, renewal is always the obligation of the policyholder and not the responsibility of insurer.

In case of life insurance, remember that surrender comes in only after the lock-in. Says Aalok Bhan, director and head-product solutions and customer marketing, Max Life Insurance: “Ulips have a lock-in period of five years post which the policyholder can withdraw the entire fund value with no surrender charges.” The surrender in case of traditional plans varies from two to three years depending on the type of policy and the premium one pays on the policy.

When it comes to insurance, like any other contract, you get what you have paid for and no more. The most important thing is to read the policy document completely and understand what is covered, check for entry age, renewal conditions, exclusions and waiting period, even if you have several insurance policies. It’s in your interest to spend time and fill forms than just sign blank forms. Also, make payments by cheques in favour of the insurance company and no one else.

In addition, as part of your policyholder rights, insist on receipt against premium paid and, in case of loss of policy document, inform the insurer and get a duplicate policy. The best way to insure your interests is to check everything till you are satisfied than rush, only to find yourself stranded despite holding an insurance policy. 

olmdesk@outlookindia.com