The next time you set out to buy insurance and find your eyes glossing over reading the policy wordings and lengthy contract clauses, remind yourself of what happened to Sumit Diwedi.
Sumit Diwedi (44) now regrets the day when he believed the insurance advisor who told him that all diseases will be covered under his health insurance policy. He felt the bitter taste when the insurance company turned down his claim saying that it is not covered under the policy. Diwedi realized that the policy had been mis-sold to him.
Being a farmer from Moradabad, he did not know much about insurance and whom to ask for justice. Left with no alternative, he wrote a letter to the Prime Minister of India. The PM’s Office redirected the letter to the Insurance Ombudsman who is authorized to address the insurance problem free of cost.
Like Diwedi, many policyholders are not aware about their rights and obligations. The insurance company is not to blame always; it is also the responsibility of the policyholder too to be informed.
One should know that once a financial paper is signed, be it insurance, mutual fund or a bank FD, it becomes a legal contract. According to this legal contract, investors have some rights and some obligations too.
Choose your own payment schedule and risk coverage
You should know the tenure of the policy, maturity value and the premium amount. Generally it is written on the top of the insurance policy document. Investors have the right to negotiate on payment schedule for monthly or annually and also on the risk coverage. In that case, the premium might change accordingly.
The Vital 15 Days
After getting the document, if any policyholder feels that it is contradicting the promise made by the agent or it is not suitable for him, he has the right to change it within 15 days time period. During this time, if you terminate the contract, no additional charges will be deducted from the premium paid. Sometimes insurance companies intentionally delay the process and try to cross the 15 days period. The policyholder should be careful and make sure that he receives the document within 15 days and should go through it carefully.
Sometimes policyholders are under a wrong impression that once the policy is bought, it has to be continued till the maturity of the policy. But it is not true. One can surrender a policy anytime with some penalty charges. In some insurance policies such as in ULIPs, there will be a lock-in period of 3 years or 5 years. When it is over, the investment can be withdrawn partially without any additional charges.
Your obligations as policyholder
One has to remember that, as a policyholder you have some obligations too. You are liable to reveal true information to the insurance company. Wrong information can lead to denial of the claim.
For instance, while buying a health insurance policy the insured should reveal his medical history, pre-existing diseases as well as lifestyle habits. If it is found wrong afterward, then the insurer is not liable to pay your claims.
Knock insurance Ombudsman’s door in case of grievance
If you are not satisfied with the response of the insurance company, there is insurance ombudsman to address your grievances. Ombudsmen are representatives of IRDA, the insurance regulator in India. The contact details of Ombudsmen are given in the IRDAI website. In case of any problem, the policyholder first has to lodge a written complaint to the insurer. The company has to reply within 15 days. If the policyholder does not receive any reply or is not satisfied with the reply, he can write to the Ombudsman.
If investors read and understand the offer document thoroughly and act accordingly, much of the issues they potentially face later go away.
So, remember: you don’t have to be Sumit Diwedi. Ask the right questions before you take the policy, not after.