Buying insurance? Know your rights first

V Viswanand, senior director & COO, Max Life Insurance explains three important rights every insurance buyer must know

Since you have chosen to read this article, I am assuming that you are aware of the importance of life insurance in your lives.

Ironically, beyond this point most consumers rely on fragmented information regarding buying a life insurance.

For most consumers, finalising a plan as per their requirement is the only important part that requires their utmost attention. However, the fact is that there are several other factors which should be considered while buying a long-term financial instrument like life insurance.

In today's digital age, a lot of information is available for the asking on the internet, but still policy holders are often ignorant about key details of policy. Very often, policy holders are unaware of their rights regarding life insurance.

The rights of life insurance customers can be broadly classified into three categories -- rights prior to purchase of the life insurance policy, rights to services after purchase of the policy, and the rights pertaining to maturity or death claims.

Rights prior to purchase

While selling the policy, the company's officers and sales agents try to understand your specific requirements and help you to identify the appropriate policy for you.

Very often, customers merely rely on the sales talk of the seller or assess the immediate income tax benefits accruing from a policy and go ahead and make the purchase.

This is not the correct way to purchase a life insurance policy.

It is within your rights to understand the exact benefits you will reap from a particular policy and which of your needs will be met by the policies on offer.

You have the right to know the financial burden the policy will place you in terms of premium payable.

You should also ask for the background and financial strength of the life insurance company, as well as past track records of complaints and claims payment made by the company.

Further it is important that you should ask for the salesperson's identity card each time to ensure her continued association with the life insurance company she is representing.

When the customer decides to buy a certain life insurance policy, the company has to inform her about the approval or rejection of the application within 15 days.

After this, if the application has been approved, the policy document has to be sent to the customer within 30 days.

If the customer feels that the company's agents are putting pressure on her to buy the policy, she can voice her protest against the inappropriate commercial behaviour of the company.

Customers have a right to protection of their confidential information as well.

According to the rules, a life insurance service provider can ask for only so much information from the customer as is required to accept or reject the proposal. 

The company also has to ensure data privacy is maintained at all times.

Rights to services after purchase

On receipt of the policy document, you have the right to think over the benefits of the policy and reconsider your purchase decision.

If you find that a particular insurance scheme is not beneficial, you can return the policy to the company within 15 days, during the free look period.

In such a circumstance, you get the right to claim the refund of the premium paid, after deduction of mortality charges and stamp fees.

In the matter of unit linked insurance, the company returns the amount of the units, calculated on the market value of the units on the day of cancellation, after deducting the above mentioned charges.

Policy holders also have the right to understand the principles of investment involved in the policy they are planning to purchase.

Since ULIP is market-linked, you can get NAV updates and an annual account statement.

On the basis of risk profile and life stage, you have the right to switch the corpus from one fund to another.

If you are not happy with the life insurance plan or the services provided by the life insurance company, you can register your complaint with the company's nodal office, or rather with the administrative inquiry officer dealing with insurance matters or with the consumer court and ombudsman, if the provided company response is not satisfactory

Rights on maturity or death claims

In its true sense, life insurance is a business of settling claims.

Within 15 days of receiving a death claim, the company must inform the necessary documents required from the claimant.

If the case needs any additional investigation, then the company has to complete the investigation within 180 days.

If there is no need for any additional investigation, then the claim is to be settled within 30 days of receiving all necessary documents from the claimant. If there is a delay in this, then the company will have to pay penal interest on the claim amount.

In case of a maturity claim, the company must send a letter to the customer informing him the date on which the policy amount is payable at least two months before the due date of maturity.

Post receiving the necessary documents from the customer, the insurer must make the payment to the consumer within 30 days.

Conclusion:

Knowing your rights is as important as choosing an appropriate life insurance plan. Only if you are aware of your rights, you can make an informed decision about the policy you intend to purchase and retain.

While we all buy a life insurance plan with intent to secure the future of our loved ones, make sure that you are well aware of your rights too, so that you and your family benefit from the regulations and guidelines designed to protect the policy holders interests.

Photograph: unsplash.com/@iahmedbd