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Errors Which Can Lead To Rejection Of Term Insurance Plans Claims

A term insurance policy is meant to cover your loved ones financial when you are not there. An unfortunate death can lead to a disastrous situation for your family if the insurance provider rejects a claim.  Though in some cases of death, the claims can be denied depending on the insurance company but there are certain errors which you always avoid so that claim rejection doesn’t happen in a normal scenario.

As a consumer few mistakes and errors which you should always avoid are:

  1. Hiding information: The information furnished by you on the proposal form is the basis upon which your insurer underwrites the policy or rather saying assesses the risk associated with insuring you. Concealing important information necessary for risk assessment like pre-existing health condition, family history, details of other insurance plans which you might have earlier taken , information relating to your lifestyle patterns like smoking and drinking habits can prove fatal in long term. When you buy term insurance policy the insurance company generally considers the information provided by the consumer as genuine and evaluates the risk based upon it but in case a claim arises it does all possible checks to evaluate the claim and in case the insurer finds any information provided by the policyholder is wrong, the insurer holds the full rights to reject your claim.

Read Related Article: Is There Any Right Age To Buy A Term Insurance Plan? 

  1. Misrepresentation of information:   The state of misrepresentation arises when the information disclosed at the time of taking the plan was not fully given by the policyholder. You might have shared the information that you smoke but wrongly shared the information about your smoking habits. At times the misrepresentation also happens because we are not able to understand what is being exactly asked for so it is advised to talk to your insurance company or your insurance advisor to get clarity. If you are buy the insurance plan online every website has live customer support to help you in this case.
  2. Policy is lisped status:  This is one of the major reasons behind claim rejection. You should be aware that the time you miss out a premium the benefits associated with your term plan also vanishes. In every year when the policy premium becomes due the insurance company notifies you about the same and even given a grace period of 30 days under which you have to pay the premium. If you still miss the opportunity the policy stands lapsed and so do the benefits associated. Anyways in case of a lapsed policy the claims are sure to get rejected.
  3. Incomplete nomination details:  This is a case where the claim would not get rejected but the family might have to face the legal hassle to get the term insurance claim accepted. Once you mention the right details of the person who is your legal nominee the insurance company processes the claim faster and they don’t face any unwanted irritation.
  4. Cause of death: In some cases of death the claims are ought to get rejected which are already written in your insurance document. Some of the common reasons under which the claim can get rejected are death due to drug overdose, death due to intoxication ,suicidal death or death due to addiction of unprescribed drugs, so it is always advised go through the policy terms and condition is  detail before you buy a policy to avoid rejection of claims in such cases.

One should very much clear about the error mentioned above as these are some of the common mistakes which we generally make. If don’t put your family into the unwanted hassles then we always try avoiding these errors

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Buying Combo Insurance plans offering both life and health make sense to you?

In last one year or so many Life insurance companies in an effort to woo new customers have launched a set of new plans which provides dual benefits of health and life cover. All these new types are plans which are available in the market today are technically not single plan under one umbrella but they are just two different plans put under one bucket. In fact if you see the core of all these plans, in all the cases you will find that a life insurance provider with its tie-up with a health insurance company is making these plans available.

As regular customer you might find it bit more attractive because other than two different covers under one plan, they also come with a lower premium if you compare the same with the premium of independent plans. But does that means this life and health insurance plans are super stars for your insurance needs? Technically speaking they are not.

When we are looking at independent covers for both life Insurance Plans and health insurance Plans, then we are actually looking at two different needs.  The amount of cover that one should look at while buying a life insurance cover should be always based on his/her long term financial liabilities towards his/her dependent. While deciding upon your health cover one should always consider rising cost of medication, existing state of health and lifestyle etc. So that things actually fit to your need plans should have the capability of being maneuvered as per you .But looking at these combo plans they actually come with lot of limitation in this case. The reasons behind why plans are launched is to help agents to easily motivate customers because as bundled offering this can attract lot of customers easily who don’t know the internal details.

Another thing which can attract you largely is the pricing of these plans which can attract you and you can fall in trap of cheaper premium. But the underlying reason why these plans are cheaper is that because offers the insurance companies a ease of sale and one point renewability which helps insurance companies in tie-up save a lot of cost and which is being passed on to the customer as reduced premium.

Other than all these factors if you still think this is suitable option for you then you should evaluate it considering each benefit of the plan independently. Correctly evaluating your life and health insurance needs separately and what specific add cover you should be looking at your health insurance and then comparing the same with the independent benefits offering under the plan under each specific type of cover. You can prefer to take help of myinsurancebazaar.com to compare between different plans available under each type of cover and then take the right judgment and not just swayed away by the lower premium of these plans.

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 Typical Myths around Life Insurance Which Can Disrupt Your Financial Plan

A life insurance plan is a worth buying insurance product and they come under various categories which offers benefits as per specific objective but if you buy them without proper planning can lead to long term financial trouble .People generally get driven by various myths around life insurance plans and make wrong buying decisions.  Insurance products other than life are primarily meant for protecting you against short term financial emergencies but when we should be looking at life policy we should look at their long term financial implication. Your investments may be a great tool towards achieving your financial goals but for achieving it you always need a disciplined method with regular investing but what if you are not there, the financial goals are still there because the goal which you were looking to achieve doesn’t only affect you but also your dependents.

A cleaner approach to life insurance planning helps you stay on track and acts as a way to fine tune your financial plan by protecting the achievement of your financial goals even if you are not there. But the problems lies when people get trapped under the various myths around life insurance, they are called myths because people generally fail to understand their underlying meaning.

 Buying life insurance at an early age. Though lot of financial pundits might advise you because at a younger age the insurance company consider the risks associated with you is less so they charge low but you should also know that the amount of life insurance plans cover which one should consider buying at any point of time should be in line with the financial worth that you owe to your dependents so it primarily dependent on the income that you earn. Buying early can be effective decision but it not that you should not buy it at the older age. As you progress in age not only your financial capability increases but always your liabilities also. The market value of the goals also increase powered by inflationary factor and also the inherent value depending on the current lifestyle.

Separate investment from protection. So when you are looking the cost of investment management and the cost of insurance things were really bad at the time when traditional ULIPs were launched In the old version of ULIP the cost of investment was actually very high so smarter investors resorted for mutual funds for financial goals attainment and term plans for protection, but if we look at the modern context and from the perspective of long financial planning strategy now the investment cum insurance plans are now quite effective in terms of cost also. It is advisable if you are looking a smart solutions don’t separate investment from protection but rather look at options which have twin features.

Hide health facts to lower premium. People generally think that concealing health facts is good for health insurance but why to do it for life insurance because it helps you in savings money in premium. Your insurance provider evaluates the cost of the cover that you have opted for depending upon your age and state of current health. A non healthy person can be more risky from the perspective for a life insurance company and if you don’t disclose your proper health records your dependents may face problem while making claims. In a situation like the original objective of why the plan was bought is deceived. So it is always advisable while making a life insurance planning you should always disclose information is detail. You should also disclose if you have an existing cover.

Insurance is not just meant for tax savings. Of course it is true you can get tax benefit under Section 80C every year for the amount of premium that you pay but it is always seen people buy small policies just with the objective of savings tax. In a scenario like this you end up blocking a huge amount of money but you actually get anything out of it. Once remember that insurance is primarily meant for protection not for tax savings.

A person planning for life insurance policy cover actually try and understand each element of the plan and see things from the perspective your long protection needs and don’t get carried away by the different myths as discussed above. A smarter plan for protection can always help in executing you financial plan in the best possible,

Always try to make effective comparison between plans from various insurance provider online to a make proactive decision towards better long term financial health.

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Things You Should Consider Before Buying A Term Insurance Plan

With the coming of online insurance comparison websites term insurance policies have now become very popular among new age customers. The premium is also very less when compared with traditional life insurance products for the same amount of cover. The only reason why a policy holder pays less for a term insurance because he /she only pays for the cost of ­­covering risk and nothing comes back at the end of the term of the policy.

There are multiple questions that need to be answered before you buy a term insurance plan:

  1. Are you the person who needs to be insured in your family: Technically the concept of life insurance lies around protecting the economic value of the wage earner of the family. So if you are the only person responsible for driving the well being of your family and your earnings are necessary for achieving financial goals of other members of the family then only you should look for term insurance as an option. In a typical Indian household the men are always responsible for running the family’s finances so he always needs a term insurance.
  2. How much cover should you have? Typically the cover which you should apply for is actually not meant for you but for your dependant so in case of you dying early the cover should able to take care of the financial needs of dependants members. Say for instance the cover should be able to take care of the monthly expenses of the family, if you have loans pending to be paid the cover should be able to repay that or even if you planned for the marriage of your kids the cost regarding the same should be also covered. Staying uninsured will defy the importance of the insurance.
  3.   Time period for which you need a term insurance cover:  The term insurance should be able cover you for a period till the time you think you will have the capacity to earn for your family. Till few years the maximum age of work was 60 years but in the present context people are working post that age. Another scenario is that due to late marriages happening you generally are not able reach your financial goals till the age of 60 which also makes the term of the cover very important. There are term insurance plans which comes with 5,10,20 and 25 years of cover and there are few which gives flexible period so for being more strategic flexible term is the need of the hour.
  4. Have you taken inflation into consideration: Typically this is the most important thing that needs to be considered in the present context. The rising cost of living is becoming a pain now. Say if you planned for something which in the present context cost you around Rs.50 Lacs but 10 years from now the value would be Rs.78 lacs if you assume a 6% inflation. So this is a factor which is very important from that context. Say your policy is suppose to serve for the marriage of your daughter which you evaluated as per the present cost as Rs.50 lac but the event is suppose to happen 10 years from now which would increase the cost by Rs.28 lacs more and which should considered. Now some insurance companies have also started offering indexation based coverage where the insurance cover increase by 5 to 10% every year which is feasible solution to look into.

Like all financial decisions buying a term insurance is also critical. If factors mentioned above are not considered well in advance then you end up staying under insured and which will defy the actual reasons why you bought the policy.

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Starting Your Career? How Much Life Insurance You Would Require?

As a young professional just after the college the first job that you try to pick is the one that fascinated you over all these years. Your first step towards becoming financially independent and getting the first paycheck is an exciting moment of success for you but with the new freedom that you get it comes with lot of other responsibilities. A major responsibility is like supporting your parents and if you are eldest then you always need to be there hand in hand with your father to support your younger siblings.

At lot of this needs a proper planning. You have to actually start defining things well in advance so that you are able to finely strategize your steps accordingly. Which financial instruments are best suited for you are tough questions to answer?

Defining your financial goals

To start with you actually need to understand your goals in details. It can be anything like buying your first car. While defining your financial goals which are supposed to be achieved after a certain period of time we actually need to define the monetary value of the same. This value has to be powered by hard core inflation numbers because you never know what would be actual value of your goal as per market prices when you are nearing to achievement.

How my life insurance necessary for financial planning?

When you are looking at insurance you are actually looking at protecting your goals. So when you plan goals you always know that the real beneficiary is not just you but your family is also major stakeholder. Even if you are not there to support them with the goals the achievement of same is mandatory. So here what plays an important role is your life insurance policy. Say if you are only person who is supposed to be supporting your father for your younger brother’s education , if you are healthy and hearty everything is ok but you can’t predict the future ,what happens if you are not there to help your father then in that case your insurance cover takes care of the same.

Like other forms of insurance life insurance is a great enabler in this case.

How much Life insurance cover you should look at?

 As per the thumb rule goes you should always have 10 to 15 times cover of your annual post tax income so that it can support your family for the next 10 to 15 years. Even if you are not there should be sufficient financial support for your family to help them trouble times.

What type of Life insurance policy you should be looking?

When we are looking at life insurance there are several types of life insurance plans. Some plans only come with plain vanilla cover called the term plan in which your beneficiaries only get the benefits when you are not there. To be defined in technical terms these types of plans only provide post death benefits and you get nothing if you survive. The other forms of life is called endowment where your beneficiaries enjoy the benefits if you are not there but you even get a money in return even if you survive growing over the period at the rate of 5% to 6% per annum

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Single And Regular Premium Payment Option: Which Is Better For Life Insurance Plans?

You may come across a lot of life insurance providers offering this as premium payment feature to its policyholders. Quite often offline agents also use single premium as a marketing tool to promote products as in most of the single premium cases the initial commission is also high compared to a regular premium payment options. People also get lured by the single premium offer because other than onetime payment you also get away from the hassles of remembering the renewal dates every year. But if get into the real calculation and value the premium considering the inflation factor, in general scenario you are always paying a much higher cost for the same amount of cover compared to one who is paying premium regularly.


Let’s consider the case of two friends Vivek and Ravi, both of them are getting married soon so they wanted to plan for a life insurance cover of Rs.75 lac for a term of 15 days. Though Vivek was quite lured by a single premium payment option of Rs.2.5 lacs because when he compared the same with Ravi’s option of regular payment he found himself savings Rs.50,000 for the same amount of cover and term. In case of Ravi, he preferred to opt for regular payment where he would pay approximately Rs. 3 lacs over a period of 15 years. Though Vivek’s option seems cheaper from Ravi’s but if you consider the inflation factor of 6%  Vivek is actually paying Rs.6lacs over a period of 15 years where as Ravi is just paying Rs.3 lacs, which is much cheaper that what Vivek would pay in case of single premium. So before considering any of payment for life insurance plan always considers the time value of money.


Other than the time value of money as a factor to choose the right type of premium payment schedule, affordability and convenience is a factor to be looked into. Though by considering the real value of the premium, regular payment of premium is a much better option. For a salaried policyholder the regular payment is the right option to choose because he has that the regular cash flows where if you are businessmen who don’t have regular flow of money may prefer to use a single premium option.


Though affordability is a factor which everybody considers but in a case of life insurance this should not be the only factor to consideration. Looking at the difference is the real value of premium based upon time value of money it overrides all other factors like convenience and affordability

 

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