Term insurance plans protect your life and financially secure the future of your loved ones in your absence. However, if you choose to disclose incorrect information or intentionally hide facts from your term plan provider, you risk the future of your family. Multiple applicants either lie or not mention their illness in a term plan to get low premiums. A few others might reduce the seriousness of the issue while disclosing it. Irrespective of what you choose, any such action can have severe ramifications on your term plan.
What happens if you hide facts in your term plan?
Hiding facts or disclosing untruthful information can defeat the entire purpose of buying a term plan in the first place. If an insurance provider finds out that you concealed relevant information, the insurer can reject your claim or even null the policy. Each year about 30% of the insurance buyers submit incorrect information, which ultimately results in claim rejection.
Consider this scenario: you buy a term plan via an agent, who fills the forms on your behalf. You read the filled forms and see the agent has not mentioned your smoking habits and diabetes condition, which are specifically asked by the insurer. You and the agent, decide to conceal this information to get low insurance premiums (smokers usually pay 20-25% higher premiums than non-smokers) and easy approval of the policy. But, even though this tactic allows you to save some money in the present, you deeply risk the financial security of your family.
In case of an unfortunate event that leads to your demise, your family/beneficiary will approach the insurance provider for the claim. However, they are shocked to find out that the insurance claim is rejected, due to non-disclosure of your smoking habits, which eventually caused your death. Now, your grieving family is additionally burdened and has to struggle to meet their expenses and maintain their standard of living.
In all, by saving some money, you compromise the monetary security of your loved ones. Moreover, your family is left with legal hassles, while they are dealing with immense stress and grief of your loss.
Hiding facts can lead to rejection of a claim?
Hiding or incorrect disclosure of the below facts can risk claim rejection:
- Lifestyle habits, such as smoking of tobacco, consumption of alcohol, drugs, etc. - When purchasing a term plan, insurers specifically ask about smoking and drinking habits. Based on the length of the addiction and the frequency of usage, the insurer decides the premiums. Be sure to mention if you have quit or in the process of quitting such a habit since that can positively impact your premiums.
- Nature of work - Insurance companies associate high risk with certain occupations like factories, mining, toxic chemicals, sedentary jobs, etc. The nature of the job has a bearing on lifestyle habits and the possible health risk factors.
- Medical and family history - Insurers decide the premium of term plans, as per your present health condition and medical history of the family-like genetic diseases, diabetes, etc.
Overall, any material facts, which increase the risk to the insured’s life, should not be hidden or misrepresented. It is always advisable to disclose truthful information at the time of policy purchase, so that the insurer can be cautious, set premiums accordingly, and ultimately guarantee the financial security of your family without the risk of claim rejection. Trust e-Term plan from Kotak Life, with economical premiums and competitive features, to be the assured security for your family’s future.
- A Consumer Education Initiative series by Kotak Life
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Reviewed By :
Prasad Pimple
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
