INSURANCE DOCUMENTS

1 DIPLOMA IN INSURANCE SERVICESMODULE - 3 NotesInsurance DocumentsPractice of life INSURANCE INTRODUCTIOND ocuments are necessary to evidence the existence of acontract. In life INSURANCE several DOCUMENTS are in DOCUMENTS stand as a proof of the contract between theinsurer and the insured. The major DOCUMENTS in vogue inlife INSURANCE are premium receipt, INSURANCE policy,endorsements OBJECTIVEA fter going through this lesson you will be able tozRecall the various DOCUMENTS used in life insurancezLearn the utility of each NEED FOR INSURANCE DOCUMENTATIONLife INSURANCE is a legally enforceable contract between twoparties both of whom are legally qualified to contract. It istherefore, necessary that the terms and conditions of theagreement must be suitably documented in a manner thatwould make it clear that both parties to the contract are Ad-idem , of the same mind. Ad-Idem means that both theparties understand the same thing in the same sense or areof the same mind on the same subject.

2 There must beconsensus or Ad-Idem between the parties to the is possible provided all the terms and conditions, rightsand duties - privileges and obligations are properly documentedin terms which can be clearly interpreted in a court of two human beings sometime silence means an2 INSURANCE DOCUMENTSMODULE - 3 Practice of life InsuranceNotes 21 INSURANCE DocumentsDIPLOMA IN INSURANCE SERVICES acceptance. But as the insurer is a legal personality entitledto contract verbal discussion between parties to the contractis not possible and hence there is a need for is also a contract of utmost good faith and enforcedonly in the distant future. It is therefore necessary that thedeclarations made by both the parties should be put in blackand white for future reference. Any suppression, willful andmaterial shall make the contract void. The insured, therefore,has a duty to declare all that he knows about himself, hishealth, his financial status in answering questions containedin the proposal form and other ancillary DOCUMENTS whichmay be required by the shall discuss in this chapter the various kinds of documentswhich become necessary at three stages of a policy (1) at the stage of proposal, which if accepted result into apolicy,(2) during the duration of the policy where several alterationsmay become necessary(3) at the end of the policy contract when insurer pays thefinal DOCUMENTS needed at the stage of the Proposal form is the basic format which is filled in bythe proposer who wants to take an INSURANCE policy.

3 It can bedefined as the application for proposal form has three portions(1) The first gives details about the proposer, his name,address, occupation, the details about the type of insurancethat he wants to take and the name of the nominee towhom the money is payable in case the policyholder doesnot survive to take the maturity amount.(2) The second portion relates to the details of the insurancepolicy that the proposer already possesses, the presenthealth conditions and the personal history of his health,any sickness or accident he might have is a detailed questionnaire and the proposer isexpected to reply to each question truthfully and female proposer has to reply to certain additionalquestions specific to her IN INSURANCE SERVICESMODULE - 3 NotesInsurance DocumentsPractice of life INSURANCE 22(3) The last portion of the proposal form relates to thedeclaration. Through this declaration, the proposer(i) affirms the veracity of the statements made in theproposal form in replying to the question(ii)affirms that he/she has not suppressed,misrepresented or concealed any fact which may bematerial to the risk(iii)agrees that this declaration along with the proposalform shall form the basis of the contract and if anyinformation is found to be false the contract will benull and void thus reinforcing the principle of Uberimma Fides (Utmost good faith).

4 (iv)further agrees to take the INSURANCE on the terms andconditions decided by the proposer further agrees to keep the insurer informed ofany changes in the position relating to his health or hisoccupation between now and the issuance of the first is thus clear that after the insurer has issued the firstpremium receipt, the contract is said to have concluded andthereafter the insurer has no right to change the terms of , the insurer has a right to offer any term and conditionbefore the final acceptance of the INSURANCE . For example, incase of a female proposer, the insurer may not agree to acceptthe risk of the childbirth. In case of certain hazardousoccupation like commercial pilots, the insurer may like toexclude the risk to life due to such case of certain deformity, the risk of accident can beexcluded. These exclusions of risks are not normal terms ofthe policy contract and therefore have to elicit consent of theproposer.

5 In case of a substandard health, the insurer maylike to accept a reduced risk during the first one or two yearsof the INSURANCE . The consent of the insured is a must forsuch limitations to be such special conditions or riders are mentioned in thepolicy either by an endorsement or attachment to thedocument. If the insurer has taken a Convertible Whole LifePlan which is to be converted to an endowment plan after 5 MODULE - 3 Practice of life InsuranceNotes 23 INSURANCE DocumentsDIPLOMA IN INSURANCE SERVICES years, the necessary condition is endorsed on the terms and conditions as mentioned in the policy alongwith such endorsements as made at the back of the policygovern the INSURANCE contract and are open to be interpretedby a court. However it may be noted that agents confidentialreport and the medical examination (confidential) report arenot part of the contract for QUESTIONS What are the different stages where documentation isrequired?

6 2 Define Proposal are certain other DOCUMENTS which may be required atthe proposal Age proofAge is an important factor in deciding the quantum of premiumagainst a policy. The document proving the age, age proofmust be reliable and the insured has to undertake as to itstruthfulness. An insurer accepts these DOCUMENTS as standardage proof -1) Certified extract from municipal records, recorded at thetime of ) Certificate of baptism or extract from Family Bible3) Extract from school or college ) Extract from service register in case of employees -Government or semi government or such other reputedinstitutions which insist on conclusive evidence of age atthe time of ) Identity card issued by Defence ) Marriage certificates issued by Roman Catholic ) Domicile ) age proofs are those which are comparativelyless reliable and therefore the insurer accepts them with apinch of salt. In other words the insurer takes certainprecautions before accepting such age proofs as IN INSURANCE SERVICESMODULE - 3 NotesInsurance DocumentsPractice of life INSURANCE 24 For example, such age proofs are examined by a senior officerand not accepted as a matter of routine.

7 Another safeguard isto offer a reduced term of policy so that the policy matures ata comparatively early age. The maximum age of maturity maybe fixed at a lower age. The insurer even may charge an extrapremium to compensate for the possible understatement ofage in such age non standard age proofs are (1) Horoscope, (2) servicerecords of employers other than those mentioned above (3)ESI card, (4) Marriage Certificate in case of a Muslim proposer.,5) Elders Declaration, 6) Self Declaration, 7) Driving Licence,8) Certificate issued by village panchayat, 9) Electoral role,10) Ration proof is insisted upon for completion of propsoal if thedeclared age of the proposer is less than 20 or more than 50or if the sum proposed is quite high, say above one Proof of incomeThis document may become necessary whenever the sumproposed is very high. Normally a sum proposed which is sevento eight times of the declared income is acceptable forinsurance.

8 But proposals do come to the insurer when theknown source of income of the proposer is much less comparedto the amount of INSURANCE desired. A service holder normallydoes not face this problem as his sources of income case of business people, the assessed income is at timesmuch less compared to what is a desirable income for theamount of INSURANCE desired. In such cases the insurer attimes calls for assessed income tax returns, or CharteredAccountant s certificate etc. Such precautions are necessaryto eliminate the possibility of moral DOCUMENTS NEEDED DURING THE CONTINUANCEOF THE Premium Receipts and Renewal PremiumReceiptsThe First Premium Receipt (FPR) is the confirmation ofinsurance. This document is important as it gives the date ofassumption of the risk but its value is nil once the policydocument has been - 3 Practice of life InsuranceNotes 25 INSURANCE DocumentsDIPLOMA IN INSURANCE Policy ContractPolicy document is a detailed document and it is the Evidenceof the INSURANCE contract which mentions all the terms andconditions of the INSURANCE .

9 The insured buys not the policycontract, but the right to the sum of money and its futuredelivery. The insurer on its part promises to pay a sum ofmoney, provided of course the insured keeps its part of promiseof paying the installments of premium as pre-amble to the INSURANCE contract makes the abovestatement clear and states that this policy is issued subject tothe conditions and privileges printed on the back of the endorsements placed on the policy shall also be part ofthe policy and it also makes a reference to the proposal formsaying that that the statements given in the proposal form arethe basis of the schedule which is printed on the policy documentidentifies the office which has issued the policy. It states thename of the policyholder, the date of commencement of thepolicy, an identification number of the policy called policynumber. This number is extremely useful for making anyreference to the insurer relating to this policy.

10 This shall avoidneedless s name is also mentioned along with is necessary to check that it is correct and any mistakeshould be immediately pointed out for correction. A mistakein the address may misdirect the premium notices and anyother future correspondence. It also states the name of thenominee and the date upto which premium has to be schedule goes on to mention, the type of policy, on thehappening of which, the sum assured is payable and to whomit is payable. It of course also mentions when and how longthe premium is to be policy document is signed by an official of the insurerand dated and stamped as per the provision of the Stamp Actto make it a completely legally enforceable Renewal Premium ReceiptsThough it is the duty of the insured to pay the renewalpremium on the due date the insurer sends a renewal premiumnotice to the insured out of courtesy and on receiving theDIPLOMA IN INSURANCE SERVICESMODULE - 3 NotesInsurance DocumentsPractice of life INSURANCE 26premium issues a renewal premium receipt (RPR)