Reading Term Insurance Policy Documents- What To Remember

Let’s say, after careful deliberation, you select a term plan to safeguard your family from any financial burdens that may arise from your untimely demise. You have figured out the coverage and the required premiums using a term insurance premium calculator. You have also determined the suitable policy tenure and added all relevant riders. Now you make the first premium payment, and it is over. Just timely premium payments need to be made, and you will be sorted. Right? Well, almost. Simply choosing a term insurance plan is not where it ends. There is still one thing that needs to be done.

After purchasing the policy, you must review the policy documents carefully to understand the terms and conditions, inclusions, exclusions, and other aspects. This is a must since it will save you from many unwarranted surprises later on. Here is a simple guide on the contents of term insurance policy documents and things that you should look out for.

What do policy documents usually contain?

Policy documents are often dreaded because they are thought to contain obtuse technical information that cannot make sense to a layperson. However, that is not true. You need to be aware of the basics, and the document becomes very comprehensible. Here’s a closer look at the essential components of a policy document.

• General Details – The first section will usually have the schedule of the policy. It will also include details of the sum assured (amount payable in case of the insured person’s death within the policy period), the premium amount payable, payment frequency (yearly, monthly, half-yearly, or quarterly), illustration of the benefits, etc. The benefit illustration has been made compulsory by the Insurance Regulatory and Development Authority of India (IRDAI) for the policy documents of specific products to combat the misselling of policies. These will help you work out the returns on your policy, if applicable.
• Death Benefits – This will list out the applicable death benefit. There are exclusions that you should read with care. Death benefits are not paid out by some insurers in case of death by suicide during the policy term or a specified period after the policy’s purchase, subject to the terms and conditions. If there are any riders that you have chosen, then some benefits may be subject to exclusions mentioned in the document.
• Free Look Period – This will be mentioned in the document, which is 15 or 30 days in usual cases. It is the period during which you can return the policy and cancel the same in case you do not find it to be fulfilling your requirements based on your reading of the policy document.
• Legal Definitions – Most documents will have sections listing the legal definitions and terms for your benefits.
• Nomination Details – This will have list and details of the nominee(s) that you have added.
• Claims Details – This will have instructions on insurance claims and the options available for getting the listed benefits.
• Revival – Many policies will have sections on the revival of the policy and its applicable tenure, i.e. within 3-5 years from the date the policy lapsed. The revival is only possible by paying all due premiums along with penalties that will be listed in there.
• Surrender – There are terms and conditions mentioned for surrendering the policy. Read through to take an informed decision if ever you plan to surrender.

Things To Cross-Check While Reading The Policy Document

Now that you have an idea of what your insurance policy document may contain, here are a few things that you should watch out for:

• Your personal information – The policy and its benefits are based on the information you provide. Hence, you should ensure that all personal details are accurate and without errors. These include your name, age, address, employment and educational information, medical history, etc. Incorrect details may lead to claim rejection in the future. You also must inform the insurance company about any changes in your personal information between the application completion and the start of coverage.
• Benefits Applicable – Keep an eye on the listed benefits listed by the policy, including the sum assured, any other bonuses/incentives, protection, long-term savings or return of premium (if you have chosen the same), tax advantages, and more.
• Schedule of the Policy – This is another vital aspect you should not miss. Keep an eye on the key points covered in this section, which include the sum assured and the amount payable as the premium. It also consists of the premium payment frequency and other vital details. If there are any errors or the information does not align with what you have chosen, reach out to your insurance company instantly.
• Free Look and Lock-In Period – If there is any applicable lock-in period during which you cannot exit or withdraw money from the policy, check the same carefully. Check the policy’s terms and conditions for surrender and the length of the free look period, during which you can return your policy if it does not meet your requirements.
• Riders and Exclusions – Keep an eye on the exclusions listed in the policy document and the circumstances/conditions under which claims/benefits are invalidated. Also, check the listing of riders that you have chosen and their features and applicability.

Investing a little time and effort into reading and understanding your policy document safeguards you from any unpleasant revelations or surprises in the future. Make sure you understand whatever is written in the document, and do not hesitate to ask your insurance advisor/agent or the insurance company about the same.