Reading into the fine print of an insurance policy

Insurance

oi-Sunil

By Sunil Fernandes

Published: Saturday, March 8, 2014, 8:40 [IST]

Everytime one reads about buying an insurance policy or meets an agent to purchase one, its often overwhelming to read the terms and conditions or ‘fine print' as one would call it. Many are confused and unable to understand the technical terms and clauses and solely depend on agent's narration of the benefits, when buying the policy.

It is, hence, not surprising to see a large number of customers claiming that the policies have not met their needs or they were cheated. It simply highlights the need to understand they key terms in a simple manner before one buys a policy. While understanding and reading the insurance fine prints may not be the most interesting thing to do, it is critical in order to ascertain that the agent has not left out informing the customer about any important details or clauses of the policy.

Here is a quick reckoner of few policy clauses for you to look out for, as these are few things that an agent may miss out on informing you:

Lock in period - Insurance policies often come with a lock in period as mandated by the IRDA. It is essentially a time period in which you can't surrender or discontinue the purchased policy. If you discontinue the policy before the lock in period ends, you lose all benefits and get no returns. Make sure you ask the agent about the lock in period and are well informed about it.

Surrender charges - Investment products in Insurance are essentially seen as a long term investment. Incase you want to discontinue an insurance policy for any reason, before its maturity, you may be levied surrender charges. These are the charges that are deducted from the fund value at the time of surrendering the policy. In some cases, these charges are steep, which may result into a loss of a substantial amount of money from your accumulated corpus. Ask your agent about the surrender charges involved and understand the implication well before making the investment.

Waiting period - Waiting period refers to the time window you need to wait, before any claim arising out of a policy, bought by you, can be paid out by the insurer. This is to say that if you are diagnosed with a critical illness within a week of buying a health insurance policy, then you may not qualify for claiming the insurance cover. Therefore, make sure that you know the waiting period for the policy and make proper disclosures before making the purchase.

Exclusions/ Limits- There are no insurance policies which cover everything. All come with certain exclusions, which you need to be mindful of while buying the policy that is best suited to your needs. For example, if you are buying a health insurance policy, you must check for any exclusions and illnesses it does not cover, to avoid any inconvenience at the time of claim settlement. Similarly, while most travel insurance policies cover your medical expenses on vacation, they typically come with a cap on upper as well as lower limit of the cost incurred. So, if your spend $100 on medical expenses on a vacation thinking that any expense within $ 500 is covered by the policy, you might be in for a surprise if there is a minimum claim amount or lower limit cap of $200 for the policy.

Lastly, while it is an agent's job to highlight the benefits and returns of a policy, it will be an equal advantage for any customer to pay attention to the fine print. Double checking on the above mentioned points will not only give you a better understanding of your policy, but will also save you any rude shocks when you either want to discontinue an insurance policy or file any claims.

Authored by: Yashish Dahiya, CEO & co-founder, Policybazaar.com