5 Crucial Clause To Read Before Buying Insurance Policy
20 May, 2014 03:03 PM
Nowadays almost everyone has insurance but how many of you have knowledge of almost all the clauses of insurance? May be few know it. What do you normally do when your insurer gives you the policy document? Mostly, all you do is just overlook the decorated words in the policy and pile it up with the other bunch of financial papers on your desk, isn’t it? It’s your own insurance policy where you spend thousands or lakhs of your hard earned money then you should have knowledge of each and every point included in it. Your insurance advisor is always there for you to help you understand the tricky terms in the insurance forms, but you should also know for yourself what your contract says.

Here is the list of few clauses that you must read before buying insurance policies:

1. Contribution Clause: Earlier this clause was a bit complicated as the policyholder was given a choice of choosing a plan while making a claim. This was very inconvenient for a customer. But now the clause is very convenient as you can choose a policy of your choice to make a claim. Also earlier if the customer had more than one policy their approved claim was divided in to ratio of the sums insured. No worries from now on as you can decide on which insurer to approach for claiming the amount.

2. Reasonability clause: Most of the disputes on claim settlement are common in this clause according to the insurers. As according to this clause only reasonable or necessary expenses are eligible for the claim. This clause is sometimes misunderstood by customers. "Reasonable charges are arrived at by insurers by comparing the standard billing by a hospital and comparing the same with the prevailing charges in the same geographical area for similar or identical services. Thus, the primary purpose of the reasonable charges clause is to ensure fair billing by hospitals," said Subrahmanyam B, senior vice-president and head, health, commercial lines and reinsurers, Bharti-AXA General. That is, if your hospital has charged you 1 lakh for a surgery which ordinarily costs 50,000, the insurer will approve the lower amount.

3. Renewability clause; Many complaints are raised by the senior citizens telling that whenever they go for the renewal of their policy their request is turned down on the basis of their age. No insurer can refuse any of your requests even if anyone does; you have all the right to sue him as a customer. But as the regulations ban changing the existing terms, it is more likely that you will always be sold a new product. It's advisable to read the clause carefully before the renewal of the contract.

4. Indisputable clause: A life insurance policy is always liable to have an indisputability clause. This clause clearly states that the insurance company will not argue on any claim after it has been in force for one or two years, except in the case of fraud. The main purpose of this clause is to protect the consumer from rejection of a death claim without any reason due to non-disclosure of material information. After a policy has been issued for a few years, it will be difficult to establish if the non-disclosure is intended or an oversight. The indisputability clause states that the insurance company will not dispute the claim on this account. The claim can also be disputed if the premium is not paid.

5. Free-look clause: If a product fails to meet your expectations, then you can always get it replaced or ask for a refund. A similar practice also exists in the insurance industry and this practice is termed the ‘free-look’ clause, it was introduced by the Insurance Regulatory and Development Authority of India to provide assurance to policyholders who have been victims of mis-selling. The clause allows policyholders to surrender the policy within 15 days after receiving it if they are not satisfied. This is applicable to health covers, with tenure of three or more years, and life insurance policies.
Source : Silicon India Fianace

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