Devil Lies In The Fine Print

It is quite common, there are serious-sounding instructions regarding the accuracy and truth of the information provided by applicant, in most of insurance forms. Also, the agents reassure the investors to ‘simply sign and we will take care of the rest’. Unfortunately, most agents are not as concerned about mentioning the policyholder’s details as they are about achieving their targets.
One of India’s biggest insurance companies earlier had a minimum target of 12 policies on 12 individuals a year for agents. This financial year, it altered the targets, and now requires agents to get 12 policies on minimum 12 people for which the first year premium is at least Rs 1 lakh, within the first three years. A friend of mine recalls an insurance agent had convinced him to buy a policy. He handed over the form to him, asking him to fill it and return it the next evening. Days after submitting the form, the agent asked him, “Why did you mark yes in the columns where they asked you about having medical treatment for more than 15 days and whether your weight had changed by 10 kg in the last year?” My friend replied that he was undergoing medical treatment for thyroid, which stretched above 15 days, and that had lost a lot of weight last year as he went through a stressful time. The agent responded, “As a result of your honesty our group missed our target. Now your policy approval will need a medical examination and the whole process has been delayed.”
The above example is just one of the reasons agents promise to give you an insurance cover saying, “No medical test is needed.” However, if you as a policyholder have signed, you are agreeing and abiding by some of the statements such as: “I have not withheld any information”, “I have not provided false information in reply to any question”, “This statement and declaration shall be the basis of the contract of assurance between me and the insurer”, “I understand and agree to the various charges such as mortality charges, policy administration charges, premium allocation charges, which will be recovered by cancellation of units or deduction of premium”, “Any doctor, hospital or employer is not prohibited from divulging any knowledge, information concerning my health, employment on the grounds of secrecy…”, “If there has been any non-disclosure of a material fact then the policy may be treated as void and all the premiums paid under the policy may be forfeited by the insurance company”. However, do you remember any agent having asked you these details before filling in your form?
In addition, the insurance form also mentions that if your health or occupation changes after you have filled the proposal but before you receive the premium receipt, you will inform the insurance company of the same. You also have to tell the insurer if during that period any other insurance policy with any company was dropped, withdrawn or added. The form says, “Any omission on my part to do so shall render the contract of assurance invalid.” When the form is filled incorrectly—whether knowingly or unknowingly—then you are considered to be hiding facts. This could result in the insurance claim not being paid to you or your family in case the insurer discovers you didn’t mention the correct details in your proposal form. Ultimately, verbal communication (conversation) between you and the agent can never be considered as proof. However, the insurance company can declare your insurance contract null and void as it has proof in hand by way of your signatures across the form.
When buying insurance, in addition to the policy document, an applicant is required to sign a premium and benefit illustration and a statement that he has understood the policy. By signing these two forms you are confirming to the company that you have understood the policy, and you cannot later claim that the agent cheated you and didn’t tell you about the policy or charges. Take-home: Insurance is a legal contract like any other legal contract. Hence, read the proposal form like you would read any other agreement that is written on a stamp paper, and ask your agent in case you have any doubts at the very start. Only after you are convinced, put your signature on it.