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The Crucial Timeline for Insurance Coverage: Offer, Acceptance, and Implications

When you submit a proposal for an insurance cover, you are essentially making an offer to enter into an insurance contract. In most cases, this offer is readily accepted. However, there are instances where the insurer may require additional information, such as a medical examination report, before making a final decision.

Uncertainties in the Process: The key question arises when something unfortunate happens to the policyholder during this evaluation phase, especially if the customer passes away before the process is concluded. Since the offer and acceptance process is not finalized, the policy conditions have not come into effect, and in such cases, the customer or their beneficiary is entitled only to a refund of the money paid towards the first premium.

Policy Contract Clarity: Several cases have been brought before consumer courts when insurers declined to pay the sum assured due to the customer’s demise before acceptance of the proposal. In most instances, both lower and national-level consumer courts have upheld the insurers’ decisions. Courts typically adhere strictly to the conditions outlined in policy contracts.

Customer Responsibilities: The customer’s responsibilities extend beyond signing the proposal form. It is crucial that the proposal reaches the underwriter promptly, and any additional requirements, whether medical or financial, are met in a timely manner. The insurer may request documents such as the last three years’ income tax returns, the most recent salary slip, or the statement of profit and loss account.

High Sum Assured Requirements: The requirements tend to be more stringent when the sum assured is substantial. Customers should maintain communication with agents or brokers to ensure a swift process. Timing is crucial, especially if the proposal is made toward the end of the financial year when agents may have a backlog of proposals to handle.

Disclosure Responsibility: The proposer must disclose all information regarding health and habits until the insurer formally accepts the proposal. Failure to do so, and later discovery of suppressed information, can render the policy contract void ab initio. The insurer is not required to prove the materiality of the suppressed information to cancel all liabilities under the policy. Accurate and complete disclosure is vital for a sound insurance contract.

Conclusion: Understanding the timelines and responsibilities associated with insurance coverage is essential. The offer and acceptance process, coupled with transparent disclosure, can ensure a smooth transition into the world of insurance while safeguarding the interests of policyholders and their beneficiaries.


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