You all are investing in Life Insurance products. Usually, you get the policy and it goes into your file. Hardly anyone ever reads it.
“The only true wisdom is in knowing you know nothing.” Socrates
When you buy a house most of you do not read the sale agreement. When you buy shares, most of you do not read annual reports. When you buy life or medical insurance policies, most of you do not read the policies.
This is either due to your confidence in the seller or your ignorance about the importance of these documents. One of the reasons could be these documents are lengthy and are full of legal terminology which most of the investors are not well versed with.
Yet, these are important documents and must be read to understand what you have purchased, what are your rights and what you haven’t given/purchased.
Here is a list of what a life insurance policy usually contains;
1) Name of the Policy:
There are plenty of life insurance policies from various companies. Various class of policies and various names under each class. At Edelweiss Tokio we have the term plans known as Total Secure Plus and Zindagi Plus. Our ULIP plan is known as Wealth Plus.
2) Event on the happening of which benefit is payable:
This is an important thing to know. Unless you know when the amount is receivable from the company you will not be knowing when to make a claim.
Usually, on maturity, every insurance company send the reminder for the process to be followed to get the money.
But when the insured person dies or met with an accident and becomes disable or suffers from a critical illness, the insurance company needs to be informed depending upon the riders selected.
Therefore, knowing this clause of your policies is very important.
3) To whom the benefit is payable:
This is usually payable to the nominee. However, you need to check the correctness of the nominees in your policy. This has to be informed to the nominee also. Unless the nominee is aware who will make the claim?
4) Premium paying terms:
For some insurance policies, premium paying term is shorter than the life term covered. Know your exact premium paying term to keep the policy in force till its full term.
5) The revival of discontinued policies:
Suppose after some premium you can’t pay the premium of the policy. It is important to know within how many years the policy can be revived with all benefits.
Usually, after the payment of the 1st three premiums, the policy can be revived within 2 years.
However, within 3 years of the new policy and after 1st three years, the non-payment of the premium for 2 years, the policy might not be reinstated.
Know this clause carefully to avoid loss and risk cover.
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Usually, if the suicide is committed within 12 months of the new policy, policy claim is not payable.
Suicide after 12 months:
- Policies issued before 1stJan 2014, death benefits are paid in full.
- Policies issued after 1stJan 2014,
- in the case of market-linked policy, 100% of the fund value is payable.
- in the case of non-market linked traditional policy, only 80% of the premium paid is payable in case of the suicide.
Some companies have 24 months waiting period. Check this clause in the policy document.
7) Guaranteed surrender value:
What are the terms and condition of the pre-mature closer of the policy is one more important clause to know.
How much money is receivable? When is the same receivable? Is there any pre-condition?
Check out the conditions.
Sometime cash requirement may compel you to surrender the policy or avail the loan against the policy. Check the condition of loan against the policy mentioned in the policy.
This can help you to avoid premature surrender of the policy in case of an emergency.
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9) Assignment and Nominees
This is another key thing to know. To whom you wish to appoint as a nominee and whether the same is properly mentioned in the policy. The name of the nominee can also be charged during the tenure of the policy.
Understand this aspect of the policy. On your death who should be the recipient of the money is perhaps the most important aspect of the life insurance policy.
10) Special conditions/Riders
If you have opted for any riders in the policy, read this out in the policy to make sure the same is as per your expectations.
Secondly knowing about the riders is also important to know when it triggers action.
Edelweiss Tokio Life – Wealth Plus plan has Rising Star Rider whereas Zindagi Plus policy has several benefit and rider options like Top up, Life Stage, Better Half, and Waiver premium.
Understand the riders from the policy documents.
“The best advice I ever got was that knowledge is power and to keep reading.” David Bailey
Keep reading but read your life insurance policy first.
You may also like to read: Why is Edelweiss Tokio ULIP unique?