Policyholders, too, need to be responsible
By R Venugopal
Recently,
I came across a lot of articles in the media warning the general public
regarding mis-selling by life insurance agents. There are many
instructions on how not to fall prey to the “sweet” words of the
salesperson. I fully agree with the precautions buyer should be aware of
and avoid different pitfalls by signing the documents blindly. The
legal dictum also says: caveat emptor (buyer beware).
However,
does this mean that only insurance agents are responsible for proper
selling? What about the customer? Does he not have any obligation of
selecting a proper product? Further, does the customer have no
responsibility in maintaining the policy? Here are a few thoughts on
what life insurance customers should do on their part.
On receipt of policy bond
How
many customers spend at least a few minutes in verifying this bond:
checking the correctness in the name, nominee’s name, address and sum
assured, among other details.
All
these are important details as even a minor mistake may lead to a lot
of delay at the time of claims settlement. No doubt, it is the duty of
the agent to give correct particulars and it is expected of the
insurance company to print out the correct details. But still is it not
in our own interest to cross-check such information before putting the
policy in the drawer? If some more time can be spent on reading all the
terms and conditions printed on the back of the policy (no doubt,
printed in a very small font, which may need a magnifying lens at
times), it would be even better.
Free-look
period: The Insurance Regulatory and Development Authority has provided
for a free-look period of 15 days from the date of receipt of the
policy bond. This permits the customer to return the policy to the
insurer and claim full refund in case he finds that a wrong product has
been delivered, among other reasons.
Change of details such as address
When
we shift our residence in the same city or we move to some other town,
we dutifully inform the postman, domestic gas agency, bank, rationing
authority, among other authorities, but we conveniently forget the
insurance company. Only when the policy lapses, we pounce on the insurer
for not sending the premium notice.
Even
when you change your employer, which is quite common now, you are
supposed to inform the insurer if your premium payment is done by your
employer under the payroll scheme or the salary savings scheme. Your
policy number has to be removed from the demand list of the ex-employer
and included in the list of the present employer. These things can
happen only if you inform the insurer.
Nomination
This
is a “must” under every policy as it enables the insurer to settle the
death claim to the nominated person. If there is no nominee, the
claimant may have to produce a succession certificate or legal evidence
of title, which may be a problem.
Nomination
assumes much importance in the case of assignments in favour of banks
or housing companies for loan, because any assignment cancels the
nomination already under the policy. So when the loan is repaid and the
policy is reassigned to the customer, he must nominate a person
immediately. Many policyholders omit this, thinking that they have
nominated at the time of taking the policies.
Keeping the policy in force
It
is not enough if a person takes a life insurance policy. To keep it in
force, the customer needs to pay premiums regularly. Usually, the
insurer permits a grace period of 30 days for payment of premiums under
the yearly, half-yearly and quarterly modes, from the due date of
premium. For the monthly mode, the grace period is 15 days.
It
is the business courtesy of the insurance company to remind the
customer by sending a notice in advance. But this may or may not happen
due to different reasons. It is the responsibility of the client to
remember the date and month of the premium and pay it to the insurer.
Again, no doubt, it is the duty of the agent to contact the policyholder
and help him/her in paying the premium as the insurer pays commission
to the agent for doing this service. But there are good and bad apples
in every field, including life insurance. But on that score, we can’t
afford to ignore to pay the premiums as ultimately we would be the
losers.
Any
transaction is a joint responsibility of all the stakeholders. In case
of life insurance, all three parties to the contract—the policyholder,
agent and the life insurance company—are responsible.
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