Life insurance in India has long been an emotional decision for families. It remains more of a push product than a pull product in our country, which is why it is often prone to fall into the wrong policies.

Life insurance should be viewed as the protection of the family's breadwinner and should be purchased as a term life insurance product. All life insurance companies offer term life insurance, and there may be differences in terms and riders. This article highlights the unknown clauses that you should be aware of before buying a term life plan.

Do you want to buy a life insurance policy?

A specific plan of action? You've already bought one? Here are some important points to note:

Disclosures

You will have to disclose your health status and family's health history. This includes illness history, current medications, health history of family members, and causes of death, if applicable. Not disclosing it is a common reason for rejecting the claim, so it is better to disclose everything and declare it properly while buying the policy. If you've already purchased the policy without full disclosure, email customer service to update your information and keep a printed copy of the policy to avoid problems during claim settlement.

Claim Settlement Ratio

Life insurance companies often market themselves with high claim settlement ratios, typically between 97% and 99%. This will be a marketing gimmick for new customers. The number of rejected claims and the breakdown between group insurance and retail policy claims will not be considered. So, don't make your decision based only on the claim settlement ratio.

Misrepresentation

Be aware of misrepresentation. This includes hobbies such as adventure sports (bungee jumping, sky diving, parasailing, hiking), smoking, drugs, alcoholism, and family health history. Correct representation is essential when buying life insurance policies.

the Insurance Intelligence Bureau

Before issuing a life insurance policy, the insurer shares the insured's data with the Insurance Intelligence Bureau, which is the central repository of insurance policies. This means you can't lie about existing policies. Applying with multiple insurers at once will highlight any misrepresentation, so honesty is crucial.

Women

In many business families, wives and daughters are shown as partners or shareholders in the business, but when buying life insurance, they are declared as housewives or non-earning members. This incorrect declaration can lead to the rejection of the claim. Women need a term cover when their income contributes significantly to the family's income.

Critical Illness Rider

When choosing term life insurance, consider adding a critical illness rider. However, keep in mind that in some policies, the basic amount insured and the critical illness rider must be calculated separately. For example:

Mr. R buys a term life policy of Rs 2 crore, in which 50 lakhs is added to the critical illness rider.

In case of serious illness, Rs 50 lakh will be given as lump sum and the life cover will continue. In case of death, the nominee will get Rs 2 crore.

In some policies, the payout for critical illness may be deducted from the sum insured i.e. Rs. 1.50 crore (Rs.2 crore term life minus Rs.50 lakh CI)

Misreading this clause can lead to problems, so read the policy wording carefully.

The responsibility of the consumer

The insurance now puts the onus on customers for disclosure, declaration and accurate representation of income, health status, medical history, family medical history, past illnesses, causes of death and hobbies of family members. Insurers can reject claims with any variation in the proposal form and at the time of claim settlement. So, customers should fill the proposal form themselves and not depend on others.

One buys a term life cover for peace of mind and to ensure adequate financial back-up for the family in case of unforeseen events. Understanding these terms is therefore vital to making an informed decision and effectively securing your family's future.