Life insurance onboarding: Disclose ailments, habits; take tests if needed

Appoint a guardian for minor nominees; update nominations after major life events

M Nagaraju, secretary, Department of Financial Services, Ministry of Finance, said at a recent event that insurance companies do not ask enough questions while selling policies. At the time of redemption, however, customers face extensive scrutiny, repeated queries, and procedural hurdles. His comments are a reminder that life insurance buyers must exercise caution during onboarding so that their nominees do not face problems at the claim stage.

 

Disclose health conditions 

Life insurance products are priced on the basis of the probability of death within a pool of customers. “Accurate information regarding the customer’s health allows insurers to price risk correctly,” says Nilesh Parmar, chief operating officer, Generali Central Life Insurance.

 

Insurers may charge a higher premium, known as loading, to cover specific health risks. “If an investigation after an early death reveals evidence contrary to the health declarations, the insurer can decline the claim,” says Parmar. Claim repudiation is more likely if death occurs within the first three years of the policy.

 

Answer all health-related questions in the proposal form accurately, including those on conditions such as diabetes or hypertension. “Disclose lifestyle habits such as tobacco consumption, alcohol use, and smoking, as these affect mortality risk and pricing,” says Parmar.

 

Customers should be agreeable to undergoing health check-ups. “Medical examinations help detect pre-existing conditions that a customer may have intentionally or unintentionally failed to declare,” says Parmar.

 

Do not misstate income 

Some customers overstate their income to qualify for a higher sum assured. This often happens due to misguidance or a lack of awareness about the consequences.

 

Misstatement of income can prompt the insurer to question the policy’s affordability and insurable interest. Remember that life insurance is meant to make good a loss, not become an instrument of gain. Misstating your income can result in claim rejection or partial settlement.

 

Income proof may not be mandatory for lower-ticket insurance policies. “Insurers typically require documents such as income-tax returns (ITRs), salary slips, or bank statements for policies with high premiums or high sums assured,” says Venkatesh Naidu, director, Insurance Brokers Association of India (IBAI).

 

Declare your income accurately and share supporting documents when required. “Choose insurance cover based on need and affordability instead of trying to maximise eligibility,” says Naidu.

 

Avoid nomination-related mistakes 

Customers often treat nomination as a routine formality. Some leave the nomination section blank, while others fail to clarify their relationship with the nominee.

 

“Policyholders sometimes nominate minors without appointing a guardian or appointee, which complicates the claim process,” says Sonam Chandwani, managing partner, KS Legal & Associates. Many also fail to update nominations after major life events such as marriage, divorce, or the death of a nominee.

 

“Invalid or outdated nominations lead to delays because insurers must seek succession certificates or legal heirship documents,” says Chandwani. Incorrect nomination also affects the ease of claim settlement.

 

Policyholders must fill in nomination details carefully, including the full name, relationship, age, and contact details of the nominee. If the nominee is a minor, they must provide the details of a competent appointee.

 

“The nomination should not conflict with the will,” says Chandwani.

 

Periodic reviews of nominations are essential because personal circumstances change over the long duration of an insurance contract. “Updated nominations ensure that policy proceeds go to the person intended by the policyholder. They also reduce the risk of administrative hurdles and disputes at the claim stage,” says Chandwani.

 

Policy buyers must inform their nominees about the existence of the policy and where it is stored. If the nominees are unaware of the policy, the insurance amount can lie unclaimed, or the claim process can get delayed.

 

Reveal existence of other policies 

Insurers ask about other policies to ensure that a person is not over-insured. “This allows the insurer to verify the customer’s ability to pay and the appropriateness of the total insurance amount,” says Kapil Mehta, co-founder, SecureNow Insurance Broker.

 

It also helps the insurer understand whether the previous cover was issued at standard or higher rates due to health issues.

 

“Incorrect disclosure regarding other policies can become a basis for repudiating a claim if it occurs within the first three years,” says Mehta. After three years, regulations generally prevent claim rejection unless clear fraud is demonstrated.

 

Check proposal form after it is filled 

In India, proposal forms are often filled out not by the buyer but by the agent. Customers must check the proposal form after it is filled. “That is because it contains critical health disclosures for which the policyholder remains responsible,” says Mehta. Errors in information, such as contact or bank details, can lead to missed renewal intimations and delays in payout.

 

Treat verification call seriously 

The verification call made by the insurance company is meant to protect the customer’s interest. “It is meant to ensure that the product suits their requirements and that they understand its features,” says Atri Chakraborty, chief operating officer, IndiaFirst Life Insurance.

 

The call helps ensure that the policy has not been mis-sold.

 

Insurers confirm personal details such as name and date of birth, and plan details such as the premium amount and sum assured. “Customers are asked to confirm their health status and are cautioned about the effect of non-disclosure on future claims,” says Chakraborty.

 

Attend the call in a quiet environment, free from distractions, so that you understand all details clearly. Respond personally and do not allow a third party to influence you during the call.

 

Use free-look period 

• Review key policy features after receiving the policy document 

• Free-look period is 15 days for offline policies, 30 days for online policies 

• Request corrections in details such as sum assured or medical responses through a signed letter 

• Surrender policy during free-look period if dissatisfied with its terms 

• Most of the first-year premium is refunded after deduction of medical test and other charges