6 mistakes to avoid while buying Insurance

Buying insurance is NOT a mistake. It is important to insure, because it purchases peace of mind. Not having insurance is much like taking a family vacation in your car and not carrying a spare tyre. The mere possibility of a flat is enough to ruin your peace of mind. Millions buy insurance, and promptly forget about it: till a claim arises. Many thousands of claims are rejected because of the common mistakes made when buying insurance. Here are the six most common ones.

1.       Not enough research:  A lot of insurance is hard sell; sold and purchased hurriedly. This leaves little time to check the suitability or need. Motivated comparisons, wrong illustrations and untrained distributors add to the confusion. It makes sense to be sure of your need, and then do a little research on what are the best options available. Research the distributor’s competence, competitive products and the companies on offer. Compare Insurance policies before you decide to buy one.

2.       Too much or too little: Buying too much is rare. Most people end up buying too little. What is the appropriate amount of insurance one must have? In the case of property (say motor, or home) it is usually simply the current value of the asset. In case of life, a rule of thumb is ten times your annual income. Health Insurance is more complicated and a lot depends on your lifestyle and ability to pay premiums. Health premiums are eligible for a tax rebate. First check out what the premiums up to the current tax limit will buy for you, adjust thereafter based on your needs.

3.       Not reading the contract/documentation: This is so common as to almost be the rule. We rarely if ever open the document and read the conditions: even a cursory glance will reveal that the contract is written to protect the insurance company. Most insurance contracts have a cooling period; usually a couple of weeks. During this period you can return the contract for a full refund. Read your rights and also ensure that your obligations are met. Many a claim is rejected because some obligation on your side is not fulfilled to the letter.

4.       Inform your family about the details: Insurance protects you and your assets. It makes sense to inform your family about the details. There have been instances where claims have been rejected because of late intimations of loss.

5.       Read the application form and fill it out yourself: Insurance applications forms are complex and carefully worded. It is wise to tell the truth and if in doubt all the details. The more complete the answer the less the scope for a claim rejection. It has happened that the distributor may enter a wrong answer in spite of you wanting to be truthful, hence fill out the form yourself to avoid nasty surprises when filing for a claim.

6.       Not buying from a professional: Insurance agents are a dime a dozen and come in all shapes, sizes, and longevities. This profession has more than its fair share of dodgy, untrained fly-by-night operators. Buy from a professional who is sincere to his profession and cares about your needs.

Made any of these mistakes and suffered the consequences? Made a new mistake? Let us know and we shall share those as well. 

Amit Kumar

6 Steps to take if your life insurance company rejects your claim

Nothing can be more traumatic than an life Insurance claim getting rejected. Primary feelings are a sense of betrayal and helplessness.

But do not lose hope; here is what you can do.

1.       Know your Rights: These are an extract of your rights as a policyholder/claimant:

a.       After you submit a claim, the company shall raise requirements all at once and not in a piece-meal manner, within a period of 15 days of the receipt of the claim.

b.      A claim under a life policy shall be paid or be disputed giving all the relevant reasons, within 30 days from the date of receipt of all relevant papers and clarifications required. If the company requires an investigation, it shall initiate and complete such investigation not later than 6 months from the time of lodging the claim.

c.       Under certain circumstances, companies are liable to pay interest on delayed claim payments. 

It is possible that you may not have in your possession documents that the company insists on your producing. This could also be one reason that the company delays/denies claims. You must inform the company in clear terms that you do not have these documents and the reasons for the same.

2.       Check the date of commencement of the policy: Insurance companies cannot reject claims under policies that have completed more than 2 years from the date of commencement, unless they can prove fraud. It will help to read Sec 45 of the Insurance Act.

3.       Check the Proposal Form: A copy of the proposal/application for insurance is part of the policy document. Check if all information was correctly provided at the time of taking out the policy.

4.       Write to the company: If both of the above are in your favour, write a letter to the company asking for a review of the claim decision. Most companies have committees that review appeals from claimants. These committees generally comprise of senior staff and they tend to have a more “open” view. Make sure your application reaches this committee.

5.       File a complaint with the Ombudsman: If the value of your contract with the insurance company is Rs 20 lacs or less, you can approach the Ombudsman. The Ombudsman is a quasi-judicial body that hears appeals against an insurance company. This service is free and there is no need to appoint lawyers or other legal personnel. Ombudsman awards are binding on the Company.

6.       Approach the Consumer Court: A large number of decisions by consumer courts have helped aggrieved policyholders and claimants.

Of course the choice to approach a regular court always exists, and you may want to seek those remedies.

It is useful to also know the claim paying history of companies before you purchase a policy. Visit us to know more. If you still have a query, please contact us.

Amit Kumar