Most people focus on selecting the right life insurance policy, comparing premiums, and choosing the appropriate sum assured. However, many policyholders overlook one of the most important parts of the application process, The Proposal Form

A small mistake or incomplete disclosure or an overlooked declaration can create complications for your family at the time of claim settlement.

An Example Policy Holders Can Relate To

Assume you purchased a life insurance policy in 2021. Today, you decide to purchase another life insurance policy from a different insurer or even from the same insurer. During the application process, the insurer will typically ask you to disclose details of all existing life insurance policies.

Now imagine that you

·       Forgot to mention your older policy

·       Miss a disclosure question

·       Incorrectly complete the proposal form

·       Fail to tick the required declaration section

The omission may seem minor at the time of purchase, but it can become important during claim assessment, especially if the claim occurred within 3 years from the date of new policy purchase.

What Happens If a Claim Occurs?

Suppose the life insured passes away within 3 years of purchasing the new policy. In such a situation,

·       The older policy purchased in Year 2021 may proceed normally during claim settlement

·       The newly purchased policy may be subjected to additional scrutiny and investigation

Why?

Because insurers are entitled to verify whether all material information was correctly disclosed at the time the policy was purchased.

Why Do Life Insurers Investigate Claims?

Life insurance underwriting is generally based on 2 major assessments,

Medical Underwriting allows the insurer to evaluate health related information, medical history, lifestyle habits and other health disclosures to asses risks.

Financial Underwriting allows the insurer to asses income, financial justification, existing insurance coverage and overall insurable interest.

Both assessments rely heavily on the information declared in the proposal form. If any material information is missing, incomplete or incorrectly disclosed, the insurer may investigate further.

What is Material Information?

Material information refers to any information that could influence an insurer’s decision to

·       Accept a proposal

·       Decline a proposal

·       Modify policy terms

·       Charge a different premium

·       Request additional underwriting requirements

Existing life insurance policies often form part of this assessment. This is why insurers ask applicants to disclose their current life insurance coverage.

Can a Claim be Rejected for Non-Disclosure?

If the insurer proves and concludes that material information was withheld or incorrectly declared at the time of policy purchase, it may raise questions during claim assessment. The insurer may take the position that “MATERIAL INFORMATION WAS NOT DISCLOSED AT THE TIME OF POLICY PURCHASE.”

Even when the omission is unintentional, it can result in additional investigation and delays during claim processing. This is why accuracy at the proposal stage is extremely important.

How to Protect Your Family?

Before submitting any life insurance proposal form,

·       Review every answer carefully

·       Disclose all existing life insurance policies

·       Verify personal, medical & financial information

·       Do not leave questions unanswered

·       Read declarations before signing

·       Keep copies of submitted proposal forms and disclosures

A few extra minutes spent on reviewing the proposal form today can prevent complications for your family tomorrow.

The foundation of every insurance contract, operates on the principle of “UTMOST GOOD FAITH & COMPLETE DISCLOSURE.” The insurer relies on the information provided by the applicant when issuing a policy.

Final Thought

Most claim disputes do not begin at the time of claim. They begin at the time proposal form is completed. Before purchasing any life insurance policy, review every disclosure carefully and ensure all information is accurate, because protecting your family starts long before a claim is ever filed.

INSURANCE AWARENESS > INSURANCE IGNORANCE