Term Insurance eBook by Jagoinvestor

Term Insurance

Ebook

- Jagoinvestor.com

copyright : www.jagoinvestor.com

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Contents

1. What is Term Plan

2. Tax benefit in Term Plan

3. What is an ideal cover for you?

4. For how long should one take a term plan?

5. What are riders and what do they mean?

6. But term plan does not return the money?

7. Return of Premium Term Plan, is it worth?

8. Free look up period

9. What do premiums depend on?

10. Online or Offline Term Plan

11. Why Premiums for Online term plan are so cheap?

12. What is the best frequency of premium --- Yearly, monthly or One-time?

13. Important points while filling up the forms

14. Exclusions in Term plan

15. Servicing and Delay in getting the policy

16.

17. Agents Commission and why you should not ask a pass-back

18. Will more than one company pay the claim?

19. What to look into a Company --- Claim Settlement

20. Complaining about some issue in term plan

21. Give clear directions and process to your family about claim.

We want your loved ones to be completely protected and hence with that commitment we have created this

e-book on Term Insurance. The main purpose of this book is to get you full clarity on Term Insurance and

how it can be a great addition to your financial life. We have tried our best to consolidate all the points

regarding a term insurance and make it easy for you to learn about it. So let .. You can finish this e-

book in few hours to few days. Just make sure your commitment is not just to learn about term insurance

but also implement the learnings and really take actions in the end. Best of luck

- Jagoinvestor Team


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What is Term Plan

Term Insurance Plan is a product that falls under the category of Life Insurance. As the word suggests, the

risk of life is covered for a specific Term (period) i.e. from 5-35years. A Term Plan is considered to be the

oldest and the purest form of Life Insurance cover available because there is no involvement of

Investment/Bonus/Returns in it. It s a simple plan which insures your life risk. Incase you die, the term

insurance plan pays the Sum Assured to your nominees.

a specific period, which you have to choose at the time of taking the policy.

The procedure involved in buying a Term Plan is comparatively simple and easy. Now days, you can buy

term plans online through Insurance company website simply by answering few basic questions, we will

touch upon this online term plans very soon.

Let s first see some basic features and points about term plans, these numbers are very generic in nature and

can vary from company to company but you can look at them as a general pointers.

Minimum age to be eligible for life insurance is 18 years

Maximum age to be eligible for life insurance is 50 years

Life insurance cover under a term plan is available up to the age of 70 years

The minimum tenure of cover can be 5 yrs and the maximum tenure can be around 35 yrs

Tax benefit in Term Plan

The other benefit of Term plan is that you get tax benefits when you buy a term insurance. The tax benefit is

on the premiums paid and also on the amount received incase of death. see each of them.


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Tax benefit on Premiums paid

Whatever premium you pay for term insurance (or any life insurance) is exempted from tax. This means you

do not have to pay any tax on that amount. The limit is up to Rs. 1 lac under sec 80C. Let s see an example

> Example - Ajay pays Rs. 15000/- yearly as Term Plan premium for himself. So now suppose his salary

was Rs. 7,50,000/-. Then he can claim a deduction of Rs. 15000 and his taxable income will reduce to

7,35,000/-. So incase he was in a 20% tax bracket. He will save 20% of 15,000 as tax benefit and will

save Rs 3,000.

Tax benefit on Death Claim

In the event of death of the person insured, the death claim amount received is also tax free/tax exempt. The

beneficiary who gets this death claim does not have to pay any tax on that amount for that assessment year.

However when it s invested and any income is earned on it tax will be charged on such income earned from

that time onwards.

> Example - Ajay was covered for Rs. 75 lakhs under a XYZ Term Plan. In the event where Ajay dies, his

family will receive Rs. 75 lakhs as the death claim. This Rs. 75 lakhs attracts NO TAX!

The important thing to note is that the above deduction and exemption can be claimed only if the Sum

Assured is more than 5 times of the yearly premium that is paid by the insured. If it is less than 5 times, no tax

benefit is available to the insured and to the beneficiaries. As and when the proposed DTC (Direct Tax Code)

passes, this sum assured will be required 20 times more than the yearly premium paid. No other tax benefit

is available apart from the two mentioned above.

What is an ideal cover for you?

According to the studies done, in India 90%

people are under-insured for Life Insurance

purpose and most probably you are one of them.

Just have a look at your life insurance cover. If you

get a heart attack right now, will that amount be

enough for your loved ones to survive further? Do

you truly

think so! Ask yourself--- will the amount of life

cover you have, will cover your family against:

> All the outstanding debts/liabilities i.e. your current loans/ credit card dues

> Should be able to provide income to cover for family expenses for many years or decades.

> Any future goals that needs financial support i.e. Future commitment like higher education of kids.


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Let us see an example

Ajay, aged 32 years has a family of 4 (self+wife+2 kids) and earns monthly income of 60,000/-. He wants to

make sure that his family should be covered properly and he should be able to cover his family for regular

income and pay off all the current liabilities he has and also provide some money to meet his future goals.

Details Expense for

Monthly expense 40,000 This expenses is required for next 20 years

Current Liabilities 15,00,000 Home loan outstanding

Future Goals 40,00,000 Kids Education & Marriage

Current Assets 20,00,000 Investments

His Life Insurance Need 1.1 Cr With 8% inflation

So a life insurance of approx 1.1 crore is required which can meet all his expectations. Now, how do you

calculate your right cover? All you need to do is find out how much money you would need that can provide

for monthly expenses for the next 20-30 yrs and then add your current liabilities and the money you require

Then subtract your current assets from it and you will come to know the approx figure of your right

insurance cover. Note: Do -10% here and there is

totally okay! The focus is to get a good enough cover; if you are too confused just get 20 times your yearly

income as the life cover.

For how long should one take a term plan?

One big question which strikes most of us is What should be the tenure of Term plan? To answer this

question, we need to understand the purpose of life insurance. The sole purpose of covering life risk is that

the Sum Assured should be a substitute of all the future amount the bread winner is going to earn in his life

time and provide for the needs of his Family.

There is a common myth that Life Insurance cover should be bought for the maximum term (numbers of

years) offered by the insurance company. The whole point of life insurance is to cover for the earning

potential of the person insured. So ideally, Life Insurance cover should only be there, till the time the

person would be earning i.e. till the retirement of the earning member because anyways after that he/she

answer whether you would need a life insurance cover when you are 70 years old? Who is dependent on

you financially at that age? How many of you are dependent on someone who is 70 yrs old?

http://www.jagoinvestor.com/2009/07/6-steps-of-doing-retirement-planning-by.html


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him till age 58 and not any longer than that. Most of the people think that taking term plan for longer

tenure would help them because anyways a person will die and all the money his family will get will be a

bonus t a very low probability event and they need to keep paying the

premiums for that long.

What are riders and what do they mean?

Riders are the extra benefits that can be purchased and covered for under the life insurance policy. Apart

from the basic Life insurance cover, you can choose to add some extra benefits, but you will have to pay

extra premium to get such add-on benefits. The basic premiums will then increase. Note that you are the

best person to answer if you really want these riders or not. Don t ask anyone else, question yourself whether

you need it or not.

There are 4 types of basic rider covers available in most of the cases:

1. AD (Accidental Death) --- In this rider, you get additional sum assured if the death is because of an

accident. Note that the basic sum assured is anyways paid in case of death by any way, but if you

have accidental rider, you get additional sum assured. Apart from accidental death, these riders also

cover you from any disability arising out of accident and then they pay you some fixed amount

every year for 5-10 yrs.

2. CI (Critical Illness): This rider gives you a lump sum amount if you are diagnosed with an illness

which is pre-specified and is mentioned in the policy. Generally all the major illnesses are covered in

Critical Illness cover.

3. DR (Accidental Disability Rider): This rider covers you for disability and pays you Sum assured in 10

instalments per year in case you become temporarily or permanently disabled.

4. WP (Waiver of Premium): This rider makes sure that in case you are not able to pay future premium

due to disability or income loss, the future premiums are waived off but your policy is still in force

like always.

But term plan does not return the money?

Most of the people who reject the idea of term plan have this point in their mind --- which is Term insurance

does not return their money at the end of the maturity period . This is really an example of how our thinking

is messed up because of other insurance products in the market that gives us back our money (paid as

premiums). We feel that anything which does not return us our money is some definitely not feasible

product.


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So those who do not like the idea of term insurance because it does not return their money back at the end;

do not realise that even if term insurance paid their money back at the end it will be peanuts. It will be

almost worthless at that point of time. For example --- if you pay Rs 10,000 per year in premium and the

tenure is 30 yrs, you will be paying Rs 3,00,000 in 30 yrs, but when you get back those 3 lacs after 30 yrs,

because of inflation that 3,00,000 will be worth very small amount at that point of time. If your expenses are

40,000 per month today, then after 30 yrs your expenses would be 2-3 lacs per month, so what will you do

with the money you get from term plan?

Now will you buy a term plan? May be!

There needs to be a shift in focus and should not be viewed from what you are losing and seen

as what you are getting . Once this focus is incepted with your Term Insurance and within your life, both

the areas will become wonderful! The sole purpose of life insurance is to cover the risk of life of the insured.

So focus on what you are getting in a term plan rather than what you are not getting. Once you realise that

at a small cost per year, you are getting peace of mind that your family is protected for life incase you are not

around, you will realise that what you pay is worth.

Return of Premium Term Plan, is it worth?

Companies are very smart and are expert in playing with your mind, so when they found out that term plans

are getting popular and one big concern Indians have is --- they

came up with Return of premium term plan . It provides the benefits of Term Plan Cover + Return of

Premium (investment purpose). If you survive the policy term, you get all your premiums paid back. But it s

important for you to understand that this good looking policy is again nothing but a gimmick because

now you have to pay EXTRA premium and that Extra premium is invested in a way that you get your

premiums back at the end of the cover period. So then, what So

say if a normal term plan premium for 50 lacs was 8,000, a return of premium term plan premium for same

50 lacs would be 15,000. So you are paying Extra 7,000 per year. If this extra 7,000 is invested for next 30 yrs

in some secure product like Fixed Deposit, it will anyways become a huge corpus. So, ultimately what I want

to say is that you are not at any big advantage in return of premium term plans .

S

Free look up period

Free lookup period is the duration when you can view the policy and choose to discontinue with the policy

incase you are not satisfied with the terms and conditions of the policy. This free look up period starts once

you receive the policy document and it s generally 15 days time.


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So if you want to return back the policy you can do that only in the first 15 days. During this period, you can

review the policy document; if you are unsure on anything then you can contact the insurance company and

request complete explanation on your queries. If you are not satisfied with the policy, you can choose to

discontinue with the policy and ask for a refund. The amount of refund will be on pro-rata basis. That means,

if you took 8 days to decide that you want to discontinue with the policy, then the insurance company will

deduct charges applicable for 8 days of the life insurance cover it provided you and refund the balance

money.

They will return the premium paid subject to the deduction of:

a) Insurance stamp duty paid under the policy

b) Expenses borne by the Company on medical examination (if any)

the premium without understanding just because you have the free-look up period to think about the actual

worth and value of the insurance policy. The best approach is to schedule a meeting with the authorized

agent and ask him questions about the policy and how it is suitable for you. Thereafter, you should do your

homework or researching on the web portal on the reviews and suggestions made by various industry

experts. It is also advised that you ask questions on online forums and get clarity on various aspects of the

policy you are about to buy. This is important because we all may think that the agent would tell us all, but

that may not be the case!

Precaution is better than cure

So, you need to make sure that you use your due diligence before buying the policy and then study the

policy document thoroughly in the free-look up period. The policy document can be anywhere from 5-20

pages long (or more), but the imprint should be read and understood before the free-look up period ends.

-look-

ends.

What do premiums depend on?

Premiums that are charged for the life insurance policies depend on your age and health conditions. It

increases with the age of the person, as his risk of dying increases as he grows old. The premiums are largely

based on two things.

1) Policy expense: These are the expenses incurred by the insurance company like administration cost,

expenses are lower than other types of life insurance cover available in the market.

2) Mortality cost: This cost is determined by your chances of dying at any given moment. As you get older,

the mortality cost increases which increases your premium cost.


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This component is relatively variable. Mortality rates are the real charges in Life insurance premiums. This

cost is applicable to every type of life insurance cover not just Term insurance. Mortality table is just the

probability of how many people will die in a given year for a particular age range and based on that the

premiums are charged. This is the reason for the premiums of life insurance policy increases if you delay

taking the term plan.

Let me give you an example to make this clear --- If your age is 30 yrs today and the premium for 25 yrs

tenure term plan with sum assured of 50 lacs is Rs 6,000 yearly. If you delay taking the term plan for 10 yrs

and you take it when you are 40 yrs old, then at that time the premiums will be much high like say Rs 25,000

term plan incase you need it right now. Each year of delay would mean

increase in your premiums.

But do premiums increase every year once I buy the term plan?

No, once you have bought the term plan, the premium will not increase every year. You will have to pay a

fixed premium every year for the rest of the policy term.

Other factors influencing the cost of premiums are Gender, Body weight, Use of tobacco, Medical history and

your overall lifestyle. So premiums for women are cheaper than men, premiums for a tobacco user is more

than a non-tobacco user, the premiums are higher if your medical history is critical or some major health

issues are detected.

Online or Offline Term Plan

Offline Term Plan - Offline purchasing is the traditional way of approaching an authorised agent and filling

up forms manually that are to be submitted along with the required documents and other formalities.

Depending upon the level of Sum Assured you have requested, the company may request you to undertake

the medical tests. You have to visit the medical centre that is pre-approved by the insurance company to get

your medicals done. As per your age and the given information, the insurer will decide if you will have to

appear for medical test or not. If there are existing complications revealed in the medical test, this can affect

can then decide to continue with them by paying the additional premium or cancel the policy and claim

refund. This process is time consuming and requires a lot many supporting documents to be attached.

Online Term Plan -

in you get an online quote that tells you the Sum Assured, Policy Term and the Premium payable. You then

proceed to buy the cover and agree to the amount of premium that gets calculated (assuming that the

information you provided is true to your best knowledge). You get the receipt of your payment and you will

get a call/mail from the company about the visit of their representative at your residence to collect the

important documents that are required for KYC formalities. As per your age and the given information, the

insurer will decide if you will have to appear for medical test or not.


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If there are existing complications revealed in the medical test, this can affect your premium (increase

platform, the doctor usually comes at your residence to get the medical check up done. This is an added

benefit you get which is very convenient and quick. You can then decide to continue with the policy by

paying the additional premium (if any) or cancel the policy and claim refund.

Why Premiums for Online term plan are so cheap?

Term Insurance can be bought offline- through authorized agents as well as Online- via company website. It

is often noted that the premium cost is lower if the Term Plan is bought online as compared to the offline

network. The main reason for such fluctuation is that because of the market segment that buys online are

A person who is net-savvy is perceived to be less risky than a person who is not net-

assumed that he will have access to better health care, a better lifestyle and more chances of outliving his

non-net-savvy counterpart. So a govt employee from Jaunpur buying a term plan directly is seen differently

than an IT professional from Bangalore taking an online term plan.

When the policy is bought online, the payment is made through credit card or net-banking, which takes

lesser time to be realised with the insurance company. So, the Insurance Company does not have to wait for

administrative costs that is saved when an online term plan is issued. These also help in saving the cost to

some extent.

Below are insurance premiums from 2 Insurance companies; one which is for online term plan cover and the

other for offline term plan cover. For the purpose of calculation we have taken, insured age to be 30 years

and cover required for next 25 years (i.e. till he is 55 years old) and the sum assured is Rs. 30 lakhs. We can

see the difference in the premium cost.

Mode of purchase/ Insurance Company Premium

Kotak E-preferred (Online) Rs. 4,014/-

SBI Smart Shield (Offline) Rs. 7,141/-

What is the best frequency of premium – Yearly, monthly or One-time?

Term plan offers various premium payment options like monthly, quarterly, yearly and one-time payment for

the whole term. The best option in most of the cases turns out to be a yearly payment as it s just once in a

each quarter. Also a yearly

payment means few thousands of outgo, which is most comfortable.


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A monthly payment would mean payment of a small amount each month. That h of headache.

There is also an option of onetime premium payment, but it is strongly discouraged. The reasons are that

with one-time payment you are tied with the insurance policy for life time and incase you feel that you want

to move to another term plan after few years, it because you have paid a big lump sum in the start

itself. At times it might happen that after few years you might not require a life cover so you can just stop

payment of premium incase you had chosen a yearly payment option.

Important points while filling up the forms

The applicant needs to be cautious while filling forms online or buying the policy through an agent. The

form should be read and understood before you start filling in the details and ticking boxes. The application

that you submit to the insurance company acts as the base for your policy to be created and the premiums

are charged according to the information that you have disclosed.

Some thinking needs to be done before you initiate filling up forms on things like, whether you have all the

correct and accurate information that is asked in the form and whether or not you are clear on the nominee

option and appropriate details about the nominee are gathered.

> The personal details section should be error-free and the spellings and date of birth should be

rechecked.

> Permanent address of the applicant should be as per the address proof. It should match with the

address written on the utility bill or passport.

> Current prevailing medical issues (if any) should be specified and the supporting documents should

be provided in the manner they are asked.

> If any particular Family history is there, then it should be mentioned appropriately.

> If the applicant is a smoker and/or consumes alcohol, then this information is to be disclosed. If you

occasionally smoke or drink, still you will come in the category of a smoker/drinker.

These are some check points where errors and mistakes are usually made. Due care should be taken to

disclose each and every material fact up to the best knowledge of the applicant. At times, the agents try and

suppress the material facts, if the applicant is a smoker and/or consumes alcohol; as this may increase the

premiums or even result in rejection of the application. If it results in increased premium, the customer may

not go ahead with the policy and the agent will have to compromise on his commission. Just for your

information an agent earns 25% of the premium in the first year, 7.5% of premium in 2nd and 3rd year and 5%

thereafter.

Example - The Kotak Life Insurance proposal form mentions that the client has to declare whether he was a

smoker or drinker earlier also even if he has left that habit long ago. Also, it depends on the company whom

they consider as a non-smoker at the time of issuing a policy. For example: Max New York Life Insurance, for

its Platinum Protect (term insurance), considers people, who have left smoking more than three years ago, as

non-smokers.


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In case, you have provided any wrong/incorrect

insurance companies. They are smarter than you at figuring it out. So contact your Insurance Company and

give them factual infor

situation than getting rejected at the time when you are in the sky.

Exclusions in Term plan

There is general exclusion in almost every term plan that the Insurer will not pay the death claim if the life

assured (irrespective of sanity) commits suicide within 12 months from the date of issue of this policy. There

are other exclusions applicable like where the Insurance Company will not pay the Accidental Death Claim

and Total & Permanent Disablement Claim that is due to:

An act or attempted act of self-injury

Participation in criminal activities

Participation in illegal activities

Being under the influence of Drug or Alcohol except under direction of a registered medical

practitioner

Racing or practicing racing of any kind other than on foot

Flying or attempting to fly in, or using or attempting to use, an aerial device of any description,

other than as a fare paying passenger on a recognised airline or charter service

Participating in any riot, strike or civil commotion, active military, naval, air-force, police or similar service, or

War, invasion, act of foreign enemies, hostilities or war like operations (whether war be declared or not), civil

war, mutiny, military rising, insurrection, rebellion, military or usurped power or any act of terrorism or

violence

Servicing and Delay in getting the policy

Offline Mode - The actual formalities of filling up forms and attaching required supporting documents is

time consuming, but the agent can assist you to gather all the required documents and the time taken for

the processing of the application is 15 days to 1 month. Note that the policy document will not be finalised

until the medical tests (if any) are completed. This may take time and if any query is raised in the reports,

then a few more tests might need to be done. So, the key to quicken this process is to co-operate with the

insurance company and make sure no delays are caused from your end.

Online Mode - It can be understood that buying online insurance policy will take a little longer than the

offline mode as there is no agent to assist in the case some help is needed. The only point of contact is the

helpdesk of the insurer. So, once you have submitted the application form, it may take anywhere from 1-2

months till you receive the policy document.


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NRI’s guide to Term plan

tch. As a general rule, the applicant has to be

resident in India to take up life insurance policy from an Indian Insurance Company, reason being the

documents required by the company like Address proof/age proof are to be for some place in India.

Moreover, if the Sum Assured required is more than 50 lakhs or so, customer is required to submit his

financial papers such as last 3 years ITR or Form-16 which again should have been done in India only. Last

thing, medical tests would be done at some medical centre that is affiliated with the insurance company

and is somewhere close to the address of the client which again will be in India. So these are the reasons

why insurance cover might have been declined to some NRIs.

So one way which might work is if an NRI wants to take Insurance, then on his/her next visit to India he

should submit his proof of residence, age, last 3 years ITR etc and get his medical tests done at his Indian

address. This way he can get insurance policy issued very easily. However, there is no need to complicate it

and incase you are out in some country and are planning to be there for the next couple of years, the best

thing would be to take term insurance from that particular country of residence and later when you come

back to India, you can buy term insurance that time.

If you have been in and out of India at various stages, it is advisable that you get your residential status

assessed by a tax-

life insurance in India.

Agents Commission and why you should not ask a pass-back

the policy premium as his commission for selling that particular policy and if you continue with the policy for

the next few years or till the maturity, the agent gets % commission throughout the term of your policy. This

is how their commission is structures:

> 25% of the premium of the policy: this is for the first year

> 7.5% of the premium of the policy: this is for the second & third year

> 5% of the premium of the policy: for the rest of the term

The primary reason as to why one should not ask a pass-

yours! Many a times it is seen that agents themselves offer such discounts or gifts and pass-backs to attract

more and more customers.

This practice is totally illegal and violates the norms laid under the Insurance Act. If the agent is found

sharing his commissions, he can also lose his license and might have to close the agency itself. These are

dangerous wat


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Let us understand how this pass-back works and why is it so attractive! So, an Insurance agent sells a policy

with a sum assured of Rs. 10 lacs, with a premium of about Rs. 50,000/- per year. He will make around 12,500

in commission for that year, out of which he might offer a discount of Rs 4000-6000 for the first year or he

offers some gift of that worth! A lot of insurance agents do this to make sure they do not lose the business

and get more and more business.

Why should this practice be stopped?

Because

it hampers your relationship with the agent. The pass-back that is offered is coming from his share of

commission and you snatching that much income from him might leave a bitter taste which may result in

foul relationship!.

So please live and let live! The other important reason, you should avoid asking for commissions, is that it

leads to mis-selling. If you ask for a share in commission, it will leave agents with lesser earnings and that

would encourage them to sell more by any means, which in turn fuels mis-selling. So in a way the whole

asking commissions back will hamper investors in the long run. What you sow is what you reap!

Violation of law using Multi-level marketing in Insurance Policies

For some years now, a new way of selling has e

agent sells a policy to a person and make him a customer. Now, this customer acts like an agent and starts

to many levels, a

person earns part of commissions earned from every person under his personal network. This whole idea of

multi-chain selling violates Insurance law and is illegal.

As given in the Section 41 of the Insurance Act; A licensed agent, whethe

appoint a sub-agent and pass on a commission to another person or entity. Any passing of commission by

an agent is construed as rebating and is prohibited under the Act.

Responsible Investor = Health Industry

We as buyers, shape this whole industry based on how we act. Over the years, we expected and asked for

share in commissions, without realising that it will one day work against us resulting in mis-selling. Such ill-

thought action is derogatory and rightly considered in-human; if such practice is carried on than one should

also expect a low level service from the insurance agent. Responsibility lies with the buyer to repel such

lucrative discounts and schemes offered by the insurance agents.

Will more than one company pay the claim?

You can split the amount of life insurance required between 2-3 insurance companies. The basic moral

behind doing so is that, if one insurer denies the claim settlement, the other insurer may clear the claim.


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You can make this split on the basis of getting life cover from government backed and private insurance

companies. This way, you can have major part insured with the Government backed Life Insurance

company and the rest to be insured by a private insurance company. It is generally seen that the

premiums of private insurers are cost effective.

If you have made such arrangement where in you are covered from more than 1 insurance company for

life risk, the very first thing, in these cases, is to declare in the proposal form that you already have a policy

has an insurance policy from the same company or any other company). Once such information is

provided, then at the time of claim, the usual practice is to submit the Death Certificate to the insurance

company with whom the policy is running for the longest period. Other companies are then informed of

the procedure due and an acknowledgment from the FIRST Company is provided to them which are

accepted by other companies.

Moreover, of late, it has been reported that generally insurance companies do not ask for an original death

certificate to settle the claims, even a photocopy of the certificate will do. So be alert while filling the form

and provide all the information about your previous policies to prevent even a minor problem later on.

What to look into a Company – Claim Settlement

Claim settlement ratio is the ratio of number of claims approved and paid against the total number of claims

made. This ratio is considered crucial as it rates the reputation of that particular insurance company.

Different companies have different claim settlement numbers and as a rule , new companies will have low

claim settlement ratio as they are new to business and most of the claims are very early claims which needs

to be scrutinized very strictly.

The biggest reason why claims are rejected are in the information given at the time of taking

the policies . the reason you should never let an agent fill up the form, because agent will not pay

much attention to what all info he is providing and can fill up the form casually for which you might have to

pay the price later.

Most of the people complain and cry when their claims are rejected and blame insurance company and IRDA

disclose the right numbers and information and why they are feeling the heat now .

One big point worth knowing is that claim settlement ratio numbers which IRDA issues is for all the policies

combined (maturity claims, death claims) for pure term plans and endowment + moneyback plans

think that the numbers are only for pure term plans. You have to make sure you choose a company which

has respectable claim settlement ratio and you trust it fully.


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LIC has the highest claim settlement numbers in India but their premiums are extremely high. To check claim

settle ratio of all the insurance companies, you can follow the link:

http://www.irda.gov.in/ADMINCMS/cms/frmGeneral_NoYearList.aspx?DF=AR&mid=11.1

Complaining about some issue in term plan

Incase there is any issue in your term plan and you want to communicate to someone about your concern.

There are different ways and places you can do that. The first thing you should do is talk to the customer

er response or are dissatisfied, then you have to escalate the

issue. Before you decide to file a complaint, take the following steps:---

Escalate the call (simply ask the junior customer care representative that you would like to speak

with his senior) and try reasoning with them

Approach the insurance ombudsman.

sometimes they are prompt and the insurance company backs down simply upon the matter being

sent to them.

If none of these have worked for you and you are still unhappy then you can consider approaching

a consumer forum. Here is how

Approaching Consumer Court Forum in India

Step 1

Send the company a written notice, hand-written or printed on plain paper which explains what exactly

happened, what you are unhappy about, what you would like the company to do and what you would do in

case the company does not resolve the issue. Here are some tips on writing this letter:

Do not misstate facts. If there has been some lapse from your side, please expressly state it.

Specify all the details which would enable the company to resolve your complaint faster (who you

spoke to, invoice number, request number, product id, date of purchase etc.).

Do not use foul language or threaten. However, be firm.

Provide a 15 day period for them to resolve your complaint.

Make sure that you mention a line to the effect that if the company fails to resolve the issue, you

would be forced to file a consumer complaint and take other action as well.

Send this letter by registered post acknowledgement due or by courier. Make sure you tell the

courier company that you would be requiring the proof of delivery (POD) from them. It usually

comes to you in 15-20 days of sending the letter.

http://www.irda.gov.in/ADMINCMS/cms/frmGeneral_NoYearList.aspx?DF=AR&mid=11.1


16

Step 2

At this stage, usually the company will call you back or email you and start taking your complaint seriously. If

they offer you relief, or some kind of incentives, coupons, free product or service, do consider their offer

-optimize. There is also the possibility that the company will not reply to your

notice or reply to say that they would not be able to solve your complaint. In such a case, you are left with no

option but to go to the appropriate consumer forum.

Step 3

Consumer Forums are divided into 3 levels --- District Level, State Level and the National.

If the total amount involved in your complaint (worth of the goods or services and the compensation you

ask for) is below Rs 20 lakhs, then you will have to approach a District Forum. Typically, you have to file your

complaint at the District Forum under whose jurisdiction the company or its dealer or its authorized agent

carries on business.

Typically it will take about 6-18 months to resolve a complaint through the District Forum. If the stakes

involved are high, either side may appeal to the State Forum and the matter may take longer. You have the

option to appear before the District Forum yourself or through a lawyer. Usually people do not have the time

to appear themselves, so they hire a lawyer. A lawyer can charge anywhere between Rs.2000 to Rs.20000 for

a consumer complaint depending upon the complexity of the case, his/her experience, and your willingness

to pay.

During the course of the case, you might have to appear 2-4 times in the

intimidated by this --- the judges are generally customer friendly and you are only required to state the facts.

Tips on writing the complaint

Make sure all the paragraphs are numbered and you state all the relevant facts properly.

Make sure you have supporting documents to prove your case.

Please add a simple clause saying that the consumer forum you are approaching is the correct one

and has jurisdiction over the matter.

You can also go directly to the nearest consumer forum and ask at the helpdesk to help you with

your complaint.

Once the consumer complaint is filed, the consumer forum sends a notice to the company asking them to

respond to your complaint. A lot of times the company will realize that you are serious and probably, to

avoid spending 10-15k on their own lawyer, simply resolve the complaint. However, in banking, insurance

and financial sector, most of the large players prefer to take the customers through court and often keep

appealing against successive defeats in front of consumer forums.


17

Give clear directions and process to your family about claim.

It is possible that you might be good at organizing and filing your documents in a timely manner and

making sure that you are never late in paying any premiums and there is no delay in managing your

finances. But the question is, will your management be of any use when no one knows where all the

important documents are when you have already departed from the planet Earth? Simply by providing your

family members with food,

make sure that they know what is to be done and whom should they contact in case of emergencies. Every

member of the family should be taken aboard and all the important information should be shared.

An ideal way of doing so is creating an emergency kit, where in you note down all the important names and

phone numbers of agents whom your family should contact in the case you are no longer there to help. This

kit should also have a copy of all your life insurance policies and along with a list of all your investments. All

stranded as that might add more stress to their emotional crisis.

Example of Instruction for Life Insurance Claim from LIC

Ajay has taken Amulya Jeevan Term Insurance policy for Rs 50 lacs cover. Ajay lives in Mumbai. He should

prepare a step by step instruction guide for his depends to follow when the claim is to be made:

Hi Family, I have a life insurance policy Amulya Jeevan with Sum assured of Rs 50,00,000. In case of my

death, you should follow this procedure.

1. Meet our Agent named Mr. Funsuk Bangdu and ask him for the claim settlement forms, incase he is not able to give it to you then you can download it from here: http://www.licindia.in/download_forms.htm

2. You should make sure you also have original policy document which I have kept at ________.

3. Make sure you have your proof of title like PAN card, Driving Licence etc AND marriage certificate copy.

4. Make sure you have taken my death certificate from ____________ which will act like my proof of death, this is Important!

5. Incase I die in an accident then have a proof of accident, this you can get from police station or hospital.

6. I have stored all the Medical treatment at ___________ , also keep with you just incase its required.

7. ___ or you can also ask my friend Robert who works with me and he can help you on this.

8. Incase you face any issues in getting claim settlement then take help of Ombudsman whose address is as follows.

Shri S Viswanathan

Insurance Ombudsman, Office of the Insurance Ombudsman, 3rd Floor, Jeevan Seva Annexe, S.V. Road, Santacruz (W), MUMBAI- 400054 Tel: 022-26106928, Fax: 022-26106052

Email: [email protected]

We hope you have got good understanding about term insurance plans in detail from this eBook. Thanks a

lot

http://www.licindia.in/download_forms.htm


18

About Jagoinvestor.com

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