The buck does not stop after you have purchased a personal finance product. Be it a life insurance policy, health insurance policy, an FD, a stock or a mutual fund, there are some dates that you need to keep in sight otherwise you will miss on important landmarks that can render your holdings useless and make financial planning look wrong. Today, let us check on the important dates for a life insurance policy, what those dates mean and why they are important.
Life Insurance Policy – Free lookup period
This is applicable when you purchase a policy and then decide to dump it. Free lookup period is the number of days provided by the insurer to a customer within which you can cancel a life insurance policy after you have received the documents from the insurer.
This usually is 15 days of receiving the policy documents when you first purchased it.
Your life advisor seldom talks about this as returning the policy is that last thing he wants you to do as his commissions are under jeopardy if you do that.
Note that when you return the policy, you get your entire premium back minus a small amount which typically includes the charges to protect you for the number for days the policy was covering you; stamp duty charges and medical tests, if any.
Premium payment grace period
Many investors forget to pay the premium for the different types of life insurance policies that they purchase. For the term insurances that I have, I have had to set reminders in yahoo and gmail so that I get intimated about the payment dates.
But the world has moved on and facilities like ECS have made sure that premium automatically gets deducted from your savings account.
But for those for whom this is a struggle, note that you get a grace period of 15 days for policies in which the mode of premium payment is monthly and 30 days for the other modes of payment namely, quarterly, half yearly and yearly.
Post that, the policy lapses.
Life Insurance Policy queries
The insurance regulator, Insurance Regulatory and Development Authority (IRDA) has mandated that any customer asking queries on their life insurance policies must be responded to by the insurer within 10 days after the query is raised.
Have you ever tried this and checked whether they responded within that time ?
Policy revival
After a policy lapses and the grace period has expired, the insurer will send you a notice within 15 days. You have an option to revive the policy.
This is an opportunity given by the insurer to you in case you have genuinely forgotten to pay the premium. This may be due to some valid reason, say unavailability of funds.
Of course, they don’t ask you for the reason. But you are given 30 days to revive your policy after the revival notice reaches you.
Claim settlements
In a life insurance policy the insurer has to settle the claim within 30 days. This is on receipt of all documentation. In case the insurer needs more time and clarifications, it still has to respond within 30 days.
If more time is required in investigations, then the insurer has 6 months to do this. But for the delayed payment, it has to pay interest. This on the claim amount. The rate will be 2 per cent above the bank rate.
Many insurers reject claims that happen in the first few years. They find it fishy and then use this time to do investigations to prove the correctness of the case.
Suppression of material facts
This is in interesting one. In a nutshell, this states that no policy can be challenged by the insurer after expiry of two years. Read below the exact wordings from the insurance act –
In accordance with Section 45 of Insurance Act, 1938, no policy of life insurance shall, after the expiry of two years from the date on which it was effected, be called in question by an insurer on the ground that a statement made in the proposal of insurance or any report of a medical officer, or a referee, or a friend of the insured, or in any other document leading to the issue of the policy, was inaccurate or false, unless the insurer shows that such statements was on material factor or suppressed facts which it was material to disclose and that it was fraudulently made by the policyholder and that the policyholder knew at the time of making that the statement was false or that it suppressed facts which it was material to disclose.
It means that during the first two years, a large number of claims get rejected. This is because of investigations undertaken the insurance company. This does not mean that claims made after two years are never rejected.
If the policy contract is based on any fraudulent statement by the policyholder. If this is found fraudulent later, the claim could be rejected, irrespective of when the policy was bought.
@Radhey,
Good stuff, thanks for covering this article, I was not aware of all the points. I am not comfortable of having ECS option for paying insurance premiums, i would rather keep alerts and pay it via netbanking or debit/credit cards. Also was not aware of Sec 45, so if we have submitted all correct information in the policy documents they won’t reject any claim settlements after 2 years.
@Rakesh, Why woudl you not be comfrotable with paying via ECS ?
@Radhey,
In case of term plans if you do not want to renew you just don’t pay the premiums. So if there an ECS facility then the funds would be debited. I’ll share my experience, i had a term plan with religare and had ECS enabled. However after one year i decided to cancel the policy, so i asked the customer service to just cancel the policy, they said that they cannot cancel and i need to pay premiums (wich was wierd)
So i asked them to stop ECS facility but they did not do that, i had sent the request thrice and finally they disabled it after two months. After that i just ignored the policy.
Rakesh
@Rakesh, Oh, that is not a good experience. Let me try at my end, there is an opportunity coming up 🙂
@Rakesh, Even I am not comfortable with ECS. It is easy to setup and all but very very difficult to get it cancelled if you wish to terminate the policy. I also prefer to put up reminders and pay it myself. Anyways these insurance companies will send you reminder emails too [my wife gets calls too] so chances to miss the payment are slim.
@Radhey Is there any way to view more number of latest comments? The main page shows only last 6 comments. May be make “latest comments” heading as hyperlink and when click on it, it takes to a separate page of say last 50 [or more] comments. Just an idea to view and not miss what others are sharing. I understand it may require some work but it could be useful. What are your thoughts?
@Vivek,
That’s exactly what i wanted to communicate.
@Radhey,
Even i was thinking on the same lines as Vivek on the latest comments options. It would be great if we could have an option to view more comments, this way we could know about the discussion on latest articles.
@Vivek K, Let me work on it.
@Radhey Sharma, Thanks Radhey, I can view more comments now. Is this the max that can be done or you are doing some more work on it?
@Vivek K, Doing more work.
Hi Radhey,
Regarding the policy queries, is the time limit for existing policy holders only or for prospective customer as well?
The reason I ask this is because I sent some queries to HDFC Life on their Click 2 Protect term plan but they refused to give me the details saying they cannot provide these details. Are they allowed to do that? Is there anything I can do against them?
@Vivek K, Sorry, which particular item are you referring to here ? Can you be more explicit ?
@Radhey Sharma, I am referring to the below: –
Policy queries
The insurance regulator, Insurance Regulatory and Development Authority (IRDA) has mandated that any customer asking queries on their life insurance policies must be responded to by the insurer within 10 days after the query is raised.
@Vivek K, Honestly it is for policies that have already been bought. If you are struggling with a new policy, write to their escalation point which is usually available on their website.
I have used it pretty well in the past.