A life insurance policy is a long-term financial commitment. Before signing up, it is important to understand what the policy covers, how long the cover lasts, what you pay and what the policyholder's family can expect if a claim arises.
Reviewing a few key details can help you understand whether the policy fits your financial needs and expectations.
1. Check the life cover and policy term
Start by confirming whether the policy provides the amount of cover and duration you expected.
Check these details:
● Sum assured: Verify the amount of life cover stated in the policy.
● Policy term: Check how long the cover remains in force.
● Policy start date: Make sure the commencement date is correct.
● Maturity date: For policies with a maturity payout, check the date and applicable conditions.
● Payout structure: Understand whether the applicable payout is a lump sum, regular income or another structure.
For example, a term insurance policy may provide life cover for 20 or 30 years, while a whole life insurance policy may provide cover up to a specified age, such as 99 or 100 years, depending on the policy terms.
The appropriate policy term depends on factors such as income, outstanding liabilities, dependants and long-term financial responsibilities.
2. Review the premium and payment terms
The premium is not the only figure to check. Look at how much you pay, how often you pay and for how long.
The policy document should state the premium amount and payment frequency. It should also explain the premium payment term, grace period and consequences of missing a premium.
For example, a policy may have a 20-year policy term but require premium payments for only 10 years under a limited-pay structure. These are two different periods and should not be confused.
Also check whether the premium mentioned in the proposal matches the amount stated in the final policy document.
3. Read exclusions, conditions and riders
Life cover does not mean that every situation is covered in the same way. The policy document specifies exclusions and conditions that determine when the insurer will pay the applicable claim.
Pay attention to:
● Exclusions and special conditions
● Conditions for keeping the policy active
● Grace period for missed premiums
● Revival provisions, where applicable
● Riders added to the base policy
● Additional premium for riders
If you have selected riders, verify that the correct riders and their terms appear in the policy document.
Also review provisions relating to surrender, paid-up status or discontinuation where these apply. The terms can vary between term insurance, whole life insurance, savings-oriented plans and market-linked insurance products.
4. Verify personal and nominee details
Even a small error in the policy record can create difficulties during servicing or when a claim is filed.
Check:
● Your name and date of birth
● Address and contact details
● Identity and proposal information
● Nominee's name and details
● Relationship with the nominee
● Nomination share, where applicable
The information provided in the proposal form is also important. Applicants should provide accurate and complete information, including relevant personal and health details, as required by the insurer.
Keep the policy document and related records accessible to the nominee or family members who may need them.
5. Understand the free-look and claim process
The free-look period gives the policyholder an opportunity to review the policy after receiving the document. It should not, however, be the first time you examine the terms.
Check:
● How to request cancellation during the free-look period
● Applicable deductions from any refund
● Claim intimation process
● Documents generally required for a claim
● Insurer's grievance redressal process
● Policy servicing contact details
Under the applicable IRDAI framework, life insurance policies must set out important terms, including benefits, premiums, payment frequency, grace period and relevant provisions on surrender and revival.
Conclusion
Reviewing a life insurance policy before signing up can help you understand exactly what you are committing to. Check the life cover, policy term, premium, exclusions, riders, nominee details and claim process rather than looking at the premium alone.
Whether you are considering term insurance, whole life insurance or another type of life insurance plan, reading the policy document carefully can help you make a more informed financial decision.
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