Reading your policy enhances awareness about your rights and duties, and also enables you to locate, and get mistakes rectified.
Reading your life insurance policy helps you know what specific benefits are available from the policy. By a thorough reading of the policy, you can learn not only the main benefits, but also rider and ancillary insurance benefits, events such as when benefits are available and to who these are payable, and so on. Reading enhances awareness about your rights and duties, and also enables you to locate, and get mistakes rectified in the policy.
Every life insurance policy has a preamble that refers to the proposal, declarations and various statements you made, on the basis of which the policy is issued. The details of the policy are given in the schedule and in the statement of privileges and conditions.
Importance of name
The schedule gives the policy number, name and address, age and date of birth of the life assured. If the proposer is different from the life assured, his/her name is also given as well as that of nominee and appointee (if any).
If any mistake is found in the name, you must get it corrected, for, such an error changes the identity of the insured altogether. Equally important is the date of birth. A higher age than actual may make you pay a higher premium through out the term. Later, if the name of the life assured is changed for some reason, appropriate legal steps should be taken to incorporate the new name.
There should not be any mistake in the name of the nominee and mention of the nominee’s relationship with the life assured. Where the relationship is shown through a single letter, a simple typographical error - such as a “W” in place of an “M” or vice versa - could land you in serious difficulties.
Dates of proposal, commencement and maturity of the policy, due dates of instalment claims or survival benefits, amount and due dates of premium and date of last premium due are also given in the schedule. These dates are interrelated, as date of commencement plus term of the policy will give the date of maturity. When you subtract one payment mode from the date of maturity, generally, you get the date of last premium due. So in a policy with yearly mode of premium payment the last premium is paid one year ahead of maturity date. There may be other important dates such as dates on which to exercise option to convert the policy into a definite plan, on which premium may have to be enhanced consequent on an enhanced benefit and so on.
Benefits can be death benefits, survival benefits and rider benefits such as accident benefit, critical illness benefit and premium waiver benefit. Accident benefit is generally available as a death benefit (payment of an additional sum assured, for example) or as a survival benefit (payment of an additional sum assured in monthly instalments, for example) coupled with waiver future premiums.
To whom the benefits are payable is also given in the schedule of the policy. Death benefits are payable to the nominee/assignee/executors/legal heirs/trustees. But survival benefits such as maturity claim, instalments in accident benefit, benefits in health insurance and annuities go to the policyholder. On death of a nominee, fresh nomination is called for. On reassignment of policy to the life assured, fresh nomination is to be done.
Privileges and conditions of policy
This section provides elaborate reading. Grace period on premium payment, guaranteed surrender value, non-forfeiture regulations, facilities for revival of lapsed policies, assignment of policies, grievance redressal procedures, addresses of Insurance Ombudsmen and papers to be submitted for making a claim are given here.
Life insurers provide many benefits which can be missed if you don’t go through the policy with a fine-tooth comb. For instance, LIC provides a free benefit to waive premium on the first Rs 20,000 sum assured under a policy, in the case of a policyholder who has had an accident. This benefit is available even to those who don’t have an accident benefit.
(The author is President, Society for Promotion of Legal and Insurance Awareness. He can be reached at email@example.com)