Jagoinvestor

August 25, 2010

Dont Declare wrong information while taking Insurance policy

An Agent comes to your home or office and tells you about an Insurance plan. It can be a traditional insurance plan or term insurance. Being an agent, he wants to make sure, you do less work. Anyway most  people feel bored or find it tedious to fill out a long form by themselves. After all, the agent is there to do it. It’s an amusing situation, that in today’s generation, we run around all day to different places to buy our TV, Fridge, Washing Machines. We inquire from a million places, read the reviews etc., and make sure you we find out each and every little detail when we buy such products for our home or our convenience, but sadly we don’t care enough to read financial documents or fill them ourselves; documents which will help take care of our little children or family when we are not around; documents that don’t even take few minutes or an hour to look at.

Coming back to the story, this Insurance agent treats the customer as King and customer also feels great about it. The maximum he will do is sign the document (after having a super quick look at the pages, making agent feel that he actually cares about it !)  The customer is a smoker, but agent doesn’t even bother to ask. Even if customer tells him about it, the agent does not put “Smoker” in the form as it might reduce the chances of getting the policy and hence no commission 🙂

Why Mistakes Happen in Life Insurance details ?

Now tax saving is coming for the year (not the protection of family, mind you !), and the customer is ready to raise his hands for questions like “Who all have Insurance?” or “Who is adequately covered through life insurance” ? The agent get his commission and mostly disappears, and customer is happily living his life under a happy impression that he has life insurance; until one day, he dies…

The family is devastated, but time goes on and once things settle down, they go to the insurance company and ask them for the Insurance Money… and Pow! The family gets sucker-punched! . The insurance company happily tells them that the customer was a smoker, but has given false information in the documents at the time of taking the policy hence by law, they are will not honour the claim! They are correct . Read a case between LIC and one customer on claim rejection.

This happens with a lot of insurance customers. They tend to give wrong information in the documents; as giving correct information increases the premium. (This happens a lot with smokers.) What’s so wrong if company asks for a higher premium for smokers? If you are a smoker, definitely from a business standpoint (and even logically) you have higher chances of dying than a non smoker. So, it’s natural to charge you a higher premium. But, if you give wrong information in the documents or try to misrepresent anything, it means company is covering a higher risk person for a a normal premium and they are very correct to reject the claim. Read this article to understand more on giving wrong or incomplete information in insurance documents.

Comment from Insurance Company Official

Sourav Shah, a senior Manager at Aegon Religare, shares some of his thoughts for claim rejection in comments section.

Hi Manish, To give you a detailed explanation of why the plan ‘iTerm’ is cheap.

The simple reason is ‘There are no middlemen – Agent – involved in selling this product.’ Since this product is sold online there are no agents commission involved and hence the company is not paying anything to the Insurance agent and thus passing on the benefit of the low cost to the consumer. We all know that most insurance products have a commission of 30-40% in the first year premium that is paid to the agent. The reason this product is cheaper because there are no agents commission involved. Secondly, Aegon Religare is the only company that has sought IRDA approvals to sell the product online since we are very keen on providing the customers what a product that they need – a simple term plan – at a price that is affordable.

Regarding the claims ratio, Manish, the 3 customers whose claims were rejected were due to wrong declaration at the time of taking the policy. They had declared themselves as non smokers. I would request all customers who are buying a term plan or any insurance product from any Life insurer, to not hide any facts while taking a policy. The insurers build up the cost based on your declaration, so its always advisable to declare truely in order to ensure that all claims are met. And if any customer faces any issue with any isurer he can contact the insurance ombudsman and he will immediatley look into their issues. Happy buying. Manish this is a beautiful and unbiased platform that you have provided for customers to clarify their doubts. Please keep up the gr8 work.

Regards,
Sourav Shah
([email protected])

(Link)

How to correct the false Information ?

In case, you have provided any wrong information in your policy document, it’s almost certain that your claim will be rejected. Don’t try to fool insurance companies. They are smarter than you at figuring it out. So contact your Insurance company and give them factual information . This may lead to increase in premium or rejection of policy, but it’s a better situation than getting rejected at the time when you are in the sky.

Subscribe
Notify of
guest

This site uses Akismet to reduce spam. Learn how your comment data is processed.

113 Comments
Inline Feedbacks
View all comments
Kusu
Kusu
8 years ago

The online policy asks you to mention on the consumption detail on a daily basis. if a person drinks 3 to 4 times in a year (limited qty. say 1 or 2 pegs) on special occasion and does not mention about this, is the policy liable for rejection.

Anuj
Anuj
8 years ago

Hi Manish,

My insurer has given me all wrong information before opening the policy. He said that you will get everything in written when you pay the premium and you will receive the bonds.

But when i received the bonds i realised that i got cheated and the policy is completely different. Now what should i do please advice. How can i stop the policy and get my first premium refunded.

Anuj

Anuj
Anuj
Reply to  Jagoinvestor
8 years ago

Thanks Manish.
I have two more questions here:
1. How to reach out to insurance ombudsman and can i share everything over email or do i need face to face interaction?
2. Is ombudsman only option or can i reach out to IRDA or to court as well,if this doesn’t resolve my problem?

Many thanks,
Anuj Tyagi

Krish
Krish
9 years ago

Very good information.

I am an NRI. During my last trip to India , I was approached by an Agent of a popular Insurance Company . After much cajoling , I gave up and agreed to buy a policy.
Like many others, I trusted him and allowed to complete my details.

Now, after I got my policy , I noticed that he made many errors regarding my Medical and Family history (one of my parent died of Cancer at early age) .

I have immediately informed the insurance company (within Free Look period) through email asking them either to correct records at no additional cost OR cancel the policy . They never responded .

Planning to go to IRDA now. Is it the right approach ?

Thanks

chennapragada srinivas
chennapragada srinivas
10 years ago

no.

Sahaj
Sahaj
10 years ago

Hi Manish,
What if I don’t smoke but friends I live with smoke. It is kind of passive smoking. Does it affect policy premium ?

chinthub
chinthub
Reply to  Sahaj
10 years ago

If the tests results come positive, then it means you are a smoker 🙂

There are no tests in my knowledge to prove whether you did active or passive smoking 🙂

Kiran Sawant
Kiran Sawant
10 years ago

Hi Manish, I am having high Cholestrol in my previous report but after taking medicines it shows normal.Can i mention this in my health insurance proposal from.same is the case with my wife which is having thyroid but shown normal in report after taking medicine.I am going for family floater policy..Please Guide..

Kiran

trackback
Avoid insurance misselling : Fill the product application form yourself
11 years ago

[…] a list of all previous policies and don’t depend on agent – fill these details yourself. Read a good post by Manish on this point […]

ABHI_RAJ
ABHI_RAJ
11 years ago

Hi Manish

I am planning to take LIC Term Plan, I went through small Ear Surgery some 4 years back. It was a small operation and I was discharged in 2 days and started my work immediately

Do I need to disclose this ? If not my Policy can become Invalid ?

(a) During the last five years did you consult a Medical Practitioner for any ailment requiring treatment for more than a week?

YES

(b) Have you ever been admitted to any hospital or nursing home for general check-up, observation, treatment or operation?

YES

(c) Have you remained absent from place of work on grounds of health during the last 5 years?

YES

Do you think it’s worth mentioning ? As Policy is more to deal with death due to critical illness , Accident or Natural death.

sahil
sahil
11 years ago

i m 32 years old.
i have taken a term plan from a private company, company did medical test at the time of taking this policy. but due to a mistake, i forgot to mention my status as a drinker. while i do drink once a month only, but i have mention at no drink in the option of drink question field. can u help me may effect on claim?
and what if claim come after 5 10 year please help…

Saket
Saket
12 years ago

Inspired by this article, I carefully filled all details about my health history in HDFC SL Ckick2protect application. Soon a pdf print of proposal form was provided to me.

To my surprise, 98% of the information I wrote does not appear in the PDF print of proposal form. For example, under ‘ have you ever suffered from disporders of digestive system. Give description of incident? ‘ I wrote-

‘Gastritis, ……Oeso………, hiatus hernia, …………., gall-stones…….etc in the year …….. Fully recovered now…..’

However what got printed in proposal form is just first 3 letters
‘Gas’

I am yet to receive the policy-document but my concern is- what if my policy document also shows this type of truncated information? Then how will my family prove in future that I had honestly declared everything in my proposal form?

I believe that the policy document represents the contract between me and insurance Co. and hence must contain each and every word I have written in my proposal form.

I have written to HDFC SL on my concern and waiting from their reply.

Meanwhile, any opinion or suggestions on this?

Sanjay Thorat
Sanjay Thorat
12 years ago

I have recently taken “ICICI Pru iCare RP Option 1” Term insurance policy on 28th March 2012 and I receive policy on 2nd April 2012.
I have given NO answer to High Cholesterol. But, when I just checked my reports of the health check-up done 6 months before, I found that I have borderline high cholesterol (Total: 231.4 and LDL: 138.4).
I am planning to go through the LIPID profile test again and report ICICI if I still have (borderline) high cholesterol. Will I get my premium amount back if my policy is rejected after reporting?
IMPORTANT: I STILL HAVE MORE THAN 10 DAYS OF FREELOOK PERIOD.

Sanjay Thorat
Sanjay Thorat
Reply to  Jagoinvestor
12 years ago

No. There was no medical test.

Debajyoti
Debajyoti
12 years ago

Hi….
While searching for a specific query about declarations in life insurance, I jumped into your blog and found it really interesting.
Would request your help in resolving a query.

While taking a policy, if a insured has not declared his other policies with that co. or other co, will it amount to suppression of facts at the time of claim and can a claim be rejected basis this issue?

Also can the insured update these details later?
Will it have any impact on the insured post the declaration??

regards
Debajyoti

Debajyoti
Debajyoti
Reply to  Jagoinvestor
12 years ago

Thanks Manish….

Prashant
Prashant
12 years ago

Dear Manish,

I took Aviva I -life term plan for 35 years.but they not asked me for medical and other test.my age is 31 years and i am non smoker.

also its not cover any others riders.

Regards
Prashant

uday
uday
13 years ago

Hi Manish,
I am regular reader of your blog and a lot of eyeopener topics on finance.
I have recently enrolled for Birla Term insurance. Eventhough, i have not declared some info on the application, I have declared it in teh medical checkup.
Please advise if there is any problem foreseen in future.

Regds
uday

Sanghmitra
Sanghmitra
13 years ago

Hi Manish,

What if someone had undergone cosmetic surgery one year back and forgot to mention that in the proposal form. Can that person notify later?
In case of Term plan with only one premium paid, can that person lapse the next premium and get another plan with informing regarding surgery.(Like from Aegon to IPru plan)

srinivasu
srinivasu
14 years ago

dear all
wellcome, kindly think once again before taking a pure term plan from net, i.e online.A few charges u may save in the premium but i suggest to take from a family friend life insurance agent, hi ! wait donot shout on me.
because you are taking it for risk cover only yes, then a person know your family will ba a timely help.
donot think in a negetive way.
In my experience, you/we have to visit nearest branch for sigatures physically on proposal forms.
people working in these life insurance companies are basically very slow learners.
i also work in one of these co. for a living !

kuldip
kuldip
14 years ago

Dear Manish,

I want 50 lac term insurance, pls guide me which is best now in market with minimum Premium

Kamlesh
Kamlesh
14 years ago

I want to go for Term Insurance. Is there any platform where I can check the Claim Settlement ratio of different Term Insurance providers?

Alcohol
Alcohol
14 years ago

Typically, there is also this question of ‘Do you take alcohol or have you taken in the past,etc.’. So, if a person is not a regular drinker but takes occasionally, say 2 to 3 times a month, would that person be considered a drinker?

Dhawal Sharma
Dhawal Sharma
Reply to  Jagoinvestor
14 years ago

to an insurance company, a person who consumes alcohol, has to be mentioned in the PROPOSAL FORM..It does not matter whether he is an occasional drinker, social drinker, or habitual drinker..Even if the proposer use to drink alcohol in the past, that too has to be mentioned in the proposal form..

srinivasu
srinivasu
14 years ago

dear all !
hi, wellcome
ulip policies have come to markets with a new face.
front loaded charges came down including surrender charges in the first 3 policy years.
but the funny part is all comapnies came out with only two ulips each.
very boaring, un proffessional sales and so called trainers.