By Tushar Chatterjee
Life insurance contracts are full of obscure technical terms. Here, are a few important terms that a policyholder must know.
Forfeiture regulation
In most policies, all benefits under a policy cease if at least two full years’ premiums are not paid. Forfeiture regulation also says that if it comes to the notice of the insurers that some material information has not been disclosed in the proposal form, the policy can still be cancelled and no benefits under the policy will be available. This is as per the provision of Section 45 of the Insurance Act, 1938.
Section 45 says that no policy can be called in question by the insurers after three years from the date of commencement or date of revival of the policy. It means that a policy can be called in question within three years from the date of revival if misrepresentation of facts made by the policyholder is established. In other words, a death claim can be repudiated even within three years from the date of revival if the insurer can prove that some material information was suppressed at the time of revival. Some agents advise claimants to lodge claims after three years to derive the benefit of Section 45. Here, the claimant should note that if a claim is preferred after three years from death, the claim can be treated as “time barred”.
Suicide clause
If the policyholder commits suicide within 12 months from date of commencement or date of revival of the policy, the claimant is entitled to receive only 80% of the premiums paid. While this may be known to most, how many policyholders know the real meaning of revival?
People think that when premium(s) is/are due for a long time and the policy is “regularised” by paying all outstanding premium(s) with interest along with health declaration (and occasionally, medical examination report), the policy is said to be revived. This is partially true. The policy lapses if premium is not paid within the grace period. Even if the policyholder turns up one day after the expiry of days of grace and pays premium with accrued interest without the insurer insisting for even a simple health declaration, the policy is actually “revived” in technical sense. Even in this case, if the policyholder commits suicide within 12 months, insurer’s liability is to pay only 80% of the premiums paid and not the sum assured with vested bonuses.
Accident benefit & permanent disablement benefit
These benefits are in the nature of riders. The accident benefit clause says that if any grievous accident results in the death of the policyholder within 180 days from the date of accident, the accident benefit (which can be the amount of the basic sum assured at the most) is payable to the claimant in addition to the basic claim amount. What many do not know is that the policy has to be in force both on the date of accident as also on the date of death. So, it is the duty of the family members of the life assured to keep the policy in force for the next six months following the accident. For permanent disablement benefit, the policy has to be in force on the date the policyholder is declared as “permanently disabled” by a government doctor.
The policyholders must read the entire policy document very carefully and in case of any doubts, call up the insurance agent or even the insurers’ offices to get the points clarified. In case of any future disputes, the court will go by the policy conditions only.
The writer is an insurance industry analyst
The fine print
If a policyholder commits suicide within 12 months of policy revival, insurer’s liability is to pay only 80% of the premiums paid
For accident benefit, the policy has to be in force on the date of accident as also on the date of death
