CHAPTER 7 Insurance Documents .
IMPORTANCE OF DOCUMENTATION IN LIFE INSURANCE CONTRACT • THE LIFE INSURANCE CONTRACT USUALLY LASTS FOR 30 OR 40 YEARS. • TRANSACTIONS MAY BE FEW. • IF THE PREMIUMS ARE PAID WITHOUT ANY DEFAULT AND NO CHANGES ARE MADE IN ADDRESS, NOMINATIONS ETC. THE POLICY FILE MAY NOT BE OPENED TILL THE CLAIM ARISES. • IN THE ABSENCE OF PROPER DOCUMENTATION, IT MAY NOT BE POSSIBLE TO KNOW THE DUES AND RIGHTS OR EVEN THE IDENTITIES OF THE PERSONS CONCERNED.
VARIOUS DOCUMENTS INVOLVED: • PROPOSAL FORM • PROOF OF AGE • PERSONAL STATEMENT • MEDICAL REPORT & OTHER SPECIAL • REPORTS IF NECESSARY • AGENTS CONFIDENTIAL REPORT / • MORAL HAZARD REPORT • FIRST PREMIUM RECEIPT • POLICY DOCUMENT • RENEWAL PREMIUM RECEIPT. • ENDORSEMENTS • RENEWAL AND BONUS NOTICES.
Proposal Form: • To be completed by the person in his own handwriting & signed in the presence of a witness. • If filled up by a person other than proposer, he has to give a declaration of explaining the contents of the proposal form. • If the proposer has answered the questions in a different language, a declaration has to be given. • If the proposer is illiterate, left hand impression has to be attested by a third party who has to give a declaration.
In the proposal form, the proposer gives a declarationthat all information furnished by him is true to the best of his knowledge. • If later at claim stage, the information is found to be incorrect, no claim will be payable by the insurer. • Insurance is based on Utmost Good Faith between both parties. • The proposer should give all true & correct information, whether it is material or not material in deciding the proposal. • The insurers should state clearly all the terms and conditions on which the proposal is to be accepted,.
Proposal Form contains the following information: • The name & address of the proposer • The name of the person to be insured, if different. • Details of the person to be insured like his occupation, date of birth etc. • Details about insurance required like plan, term and sum assured. • Riders to be added • Details about earlier proposals for insurance • Preferred mode of payment of premium • Employment particulars • Nomination
PERSONAL STATEMENTIt contains the following particulars: • State of health • Personal Habits • Family History • Medical consultations & illnesses • Details about absence from work due to medical grounds • Particulars about employer • Additional details about female proposers
PERSONAL STATEMENT - contd. • State of health is important to find out whether the life is a standard or a substandard one. • Personal habits like smoking, drink etc. affect the longevity of the life to be assured. • Family history reveals the physical characteristics which may be inherited from the parents of the life to be assured. A family history of tuberculosis, heart disease, insanity, diabetes etc. requires special consideration. • If the life to be assured has been suffering from any serious illness and medical consultations have been taken, additional medical reports may be called to assess the risk. • A person who has not been away from work on sick grounds is normally considered as a first class life. • If the life to be assured is working for a reputed organisation who maintain proper leave records, he may be granted cover on non-medical basis.
As per Insurance Regulatory Development Authority (IRDA) Regulations, 2002, copy of the proposal is to be supplied to the policyholder within 30 days of the completion of the contract. The medical report and the agents report are confidential & are useful to the underwriter. The proposer is not responsible for & is not bound by the data in those documents.
FIRST PREMIUM RECEIPT (FPR) • On underwriting if it is found that the life is standard or first class (not attracting any extra premium) then it is accepted at Ordinary Rate (OR). • If not, appropriate extra premium will be charged and/or terms of acceptance may be modified. • If proposer does not agree to the revised terms, the premium is refunded. • If he accepts, he has to submit the balance premium and submit the requirements and then the FPR is issued. • IRDA requires that the insurer takes the decision within 15 days.
Once FPR is issued, the insurer becomes liable to pay what is agreed upon. • The policy document can be issued only after FPR is issued. • Sometimes it may so happen that claim arises after FPR is issued but before policy document is issued. In such cases, the insurer has to pay the claim since the contract begins on issuing the FPR.
An FPR contains particulars of the policy such as :- • policy number, • date of commencement of risk, • date of maturity, • date of last payment of premium, • premium amount, • mode of payment • name & address of the life assured • due date of the next premium due.
Back-dating of policies is allowed within the same financial year. • The premium due dates will be on the basis of such a back-dated date. • However, this Date Of Commencement is only notional as risk cover commences only from the date of issue of FPR.
The contract beginswith theissue of FPR and both the parties have to fulfill the obligations. • Obligation of insurer - to pay claim whenever it arises. • Obligation of life assured - to pay the premiums as & when they fall due. • However, IRDA has given an option to the proposer to withdraw from the contract within 15 days of the issue of the policy subject to deduction of expenses incurred by the insurer towards placing the policy in his books.
RENEWAL PREMIUM RECEIPT (RPR) : • After payment of the First Premium, every year whenever the premium falls due, the life assured has to pay the Renewal Premium for which RPR will be issued. • Nowadays premium can be paid at any branch or through internet.
In Policies under Salary Savings Schemes, since premium is deducted from the salary, RPRs are not issued. • The premium deducted is shown on the salary slip. So the policyholder is supposed to check the salary slip whether deductions are promptly made. • If deductions could not be done due to reasons beyond his control like leave without pay etc, he has to arrange separately for payment.
POLICY DOCUMENT : • IT IS THE MOST IMPORTANT DOCUMENT WHICH IS THE PROOF OF CONTRACT. • A POLICY DOCUMENT CONTAINS: • HEADING • PREAMBLE CLAUSE • OPERATIVE CLAUSE • PROVISO • SCHEDULE • ATTESTATION AND • PRIVILEGES AND CONDITIONS
HEADING: The top of the front page contains the name and other particulars of the insurer. It thus enables to know at the first sight as to which insurer has issued the policy. PREAMBLE: It makes the proposal and the declaration as the basis of the contract. Hence the information furnished by the proposer must be strictly and literally true and correct. It also certifies that the First Premium has been received at the terms stated in the schedule.
OPERATIVE CLAUSE: This clause deals with the mutual obligations of the parties to the contract. The life assured has the obligation to pay the premiums as and when it falls due. The insurer has to pay the claim when it arises as agreed upon in the contract. PROVISO : The conditions and privileges printed at the back of the policy, the schedule of the policy and the endorsements made thereon are all part of the policy contract.
SCHEDULE: It contains the details of the individual policy. A glance at the schedule only is sufficient to know about the full particulars of the policy. ATTESTATION: The date and signatures of the authorised official of the insurer are put on the policy. It confirms and certifies that the insurer has entered into the contract. PRIVILEGES AND CONDITIONS: These are printed at the back of the policy bond and also become a part of the policy contract.
ENDORSEMENTS • IN CASE ANY CHANGES ARE NEEDED TO BE DONE IN THE POLICY DOCUMENT, ENDORSEMENTS ARE DONE AND IT IS PASTED TO THE POLICY, KEEPING IN MIND THE TERMS OF ACCEPTANCE. • THE ENDORSEMENTS FORM A PART OF THE POLICY DOCUMENT. • DURING THE CURRENCY OF THE POLICY, ALTERATIONS MAY BE EFFECTED IN AGE, PLAN/TERM, SUM ASSURED, MODE ETC. • NOMINATIONS CAN BE CHANGED AFTER THE ISSUE OF POLICY BY ENDORSEMENTS.ASSIGNMENTS ARE ALSO MADE AT THE BACK OF THE POLICY AS ENDORSEMENTS.
RENEWAL & BONUS NOTICES • REMINDERS TO POLICYHOLDERS REGARDING PREMIUMS DUE, ARE NOT IMPORTANT DOCUMENTS. • RECEIPT OF THE NOTICE IS ALSO NOT ESSENTIAL FOR PAYMENT OF PREMIUM. • BONUS INTIMATION NOTICES ARE NOT IMPORTANT. THE BONUS DATA IS UPDDATED IN THE INSURER’S FILES AUTOMATICALLY. THE POLICYHOLDER WILL KNOW ABOUT THE BONUS DECLARATIONS THROUGH NEWS ITEMS AND ADVERTISEMENTS IN THE MEDIA MUCH EARLIER.
PROSPECTUS THE IRDA (PROTECTION OF POLICYHOLDERS INTERESTS) REGULATIONS,2002 STATES THAT THE PROSPECTUS ISSUED BY THE INSURER SHOULD STATE THE SCOPE OF BENEFITS, CONDITIONS, WARRANTIES, ENTITLEMENTS, EXCEPTIONS, RIGHT FOR PARTICIPATION IN BONUS, ETC UNDER EACH PLAN OF INSURANCE.
THANK YOUM. J. MALIKS.B.A.836 B.O.AHMEDABAD D.O.email@example.com