What's There in the Fine Print of Your Life Insurance Policy?
Buying a life insurance cover is one of the smartest financial decisions of life. You can avail the benefit of very low insurance premiums if you buy at an early age. Also, life insurance policies may have added benefits like critical (life threatening) illness and accidental covers. After buying the policy, you receive the policy documents with a quote stating:
“Please check the life insurance policy details in the document. You can return the policy with a full premium refund within the free look period of 15 (30 in some cases) days after receiving the documents.”
The policy details in the document not only contain your name and personal details it also contains the terms and conditions of the claim settlement. Although, such important information is often provided in very small fonts, and quite challenging to read. So, for your easy understanding here we summarise the life insurance policy details that are finely printed in the policy document:
The Conditions Where No Claim Will be Paid
These are usually called exclusions. These list the conditions when the insurer will not pay the death claim. The exclusions include conditions of death or accident where the insurer will not consider the claim. Also, while buying the policy, you need to ensure that you provide the insurer correct and updated information about the following:
- Existing Diseases
- Occupation details
- Physical Conditions
- Previous Proposals
- Existing Life Insurance Policies
These factors are considered vital (relevant factors) for life insurance policies. Even though life insurer can only reject a policy for wrong information in the first three years; it is better to provide correct information.
The Benefit Amount Payable Under Death Benefit
The life insurance policies’ primary objective to cover your loved ones in the event of your unfortunate demise. Thus, the death claim payable under the policy is mentioned in a separate section. Depending on the type of policy, it may include any or both of the following:
- 100% of Sum Assured under the policy
- 100% (or more) of the total premium paid under the policy
Whenever both conditions apply, usually, the insurers pay the higher amount out of the two.
Other benefits Inbuilt or Bought as Rider with the Policy
Life insurance policies often come with added benefits. For example, accidental death and disability benefit, double accidental benefit, critical (terminal) illness benefit or premium waiver benefit.
This section offers details on which of these benefits apply to your life plan and to what extent,
For example, double accidental benefit states that in case of policyholder’s death in an accident, the benefit paid to the family is double of the sum assured. Thus, paying Rs. 20 lakhs instead of the base death benefit of Rs. 10 lakhs. But this will be limited to Rs. 15 lakhs. Therefore, the benefit paid to the nominee in case of accidental death will be Rs. 15 lakhs and not Rs. 20 lakhs.
Exclusions Under the Other Benefits
Critical and other add on benefits with the life insurance policy also have exclusions. For example, the accidental cover does not apply if an accident occurs while performing a stunt or an adventure activity.
Similarly, the life insurance policy details will contain the exclusions for terminal illness claims as well. For example, most critical policies do not cover Acquired Immune Deficiency Syndrome (AIDS), or initial stages of critical disease like cancer.
Definitions of Various Terms
Any insurance policy contains a lot of jargons, which have a different meaning for insurance contracts than the common usage. This is also true for life insurance policies. Thus, life insurance policy details also offer definitions for these jargons.
For example, ‘Hazardous Activities’ is the term used for addressing the activities where accidental death and disability claim will not be payable.
While the front page of the policy offers the policy holder’s details, nominee, and riders applicable, the crux of the life insurance policy details lies on the inside. With the list offered in brief here, you can now explore the heads that you feel the most about, instead of reading the whole document.