An insurance policy is a legal contract between an insurance provider and a policyholder. While the contract can be legal it may not always have your best interests in mind. Potential policyholders need to take measures to safeguard themselves and ensure insurance providers don’t give them a raw deal. Insurance policies are supposed to give you financial security. If you get a badly drawn contract, you will end up paying a lot of money in premiums and get little to no coverage.
Understanding your insurance policy
There are key terms you will see in your policy when you’re presented with a contract. The Title shows what kind of insurance policy you’re applying for. This also includes the identity of the insurance provider.
Next on the document is the Preamble. This details the conditions to be met by all involved parties before the contract is completed. It also lists the parties, the agreement, the policy schedule, the requirements for the proposal, the premium amounts, policy terms, compensation upon the event, and the sum insured.
The Policy Schedule lists the identification details of the policyholder, policy type, number, place of employment, entity covered, start date, sums assured, and cover limits.
After this, the contract has the Definitions, Policy Benefits, Policy Exclusions, Policy Conditions, Signatures, and confirmation that the policyholder is satisfied with the policy. Policyholders get 30 days during which they can accept the terms of the policy and sign or reject the contract.
Many policyholders sign contracts without fully understanding what can or can’t be provided. It’s also easy to forget to inspect the policy until there is an incident. Different policies have different terms regarding when they need renewals or premiums. It’s important to remain on top of your insurance policy.
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What you need to ask your insurance agent before signing a contract
If you can, get an advisor to provide you with proper guidance before you sign up for various insurance policies. In the event you don’t have one, ensure you ask your agent enough questions to get a full understanding of the contract and avoid any shortcuts from your provider.
1. What alternatives are available?
When shopping for an insurance policy, a company may assign an agent to you. This agent’s goal is to sell you the most profitable option. Ensure you ask for all available options within that provider. Do this for multiple providers before you finally decide which insurance provider to settle for.
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2. How much coverage do you need?
Once you’ve narrowed down which providers you’re seriously considering, get the exact figures for how much coverage you will need. If you have a high-risk career, you may need more coverage but your provider may not be willing to provide something comprehensive. Asking your agent to be clear about what the insurance company is willing to provide and how much your budget allows, leaves no room for being taken advantage of.
Compare any information available in brochures, websites, and what the agent is telling you to see if the deal you’re getting is completely honest. Share what your budget allows and see what they provide that corresponds with what you’re willing to pay for premiums.
3. How much is the insurance cover?
Your agent needs to provide accurate information regarding how much you’ll need to pay for the cover. For example, a life insurance policy can be 10 times the annual premiums paid. Ask your agent what differs if you pay a lower or higher premium. This helps you compare with more information. Look at your needs and decide against all information available to you.
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4. What are the benefits?
Ask multiple questions about the benefits of the policy. The insurance provider has a benefits illustration. Ask your agent to show this to you. Look at the plan options, individual benefits, and any riders. These are additional specific items to the policy that a policyholder has to pay extra for. Riders can also be items on the policy that aren’t adequately covered.
Agents can oversell benefits just to complete a sale and get a contract. You need to confirm if the benefits are guaranteed. The website and brochures can give you more insight into whether the policy benefits are guarantees or non-guarantees.
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5. Are there bonuses?
A policy can have bonuses. However, some policies require specific conditions met if you are to receive benefits. Ask your insurance agent about the factors affecting bonuses and how you receive them under the plan you’re interested in.
6. What are the associated risks?
See if the policy you’re interested in is an investment risk. Ensure your agent expounds whether it has risks and the types before signing the contract.
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7. What are the exclusions?
This is a condition where many policyholders get caught out. When signing up for a policy, you can find out about all the situations where you may not be able to get your payouts. Ask your agent about all the factors that can make you ineligible for the insurance amounts.
8. How long is the lock-in period?
Depending on the provider’s policy, you will not be able to make any claims or withdrawals for a certain amount of time. Your agent should inform you of the exact amount of time you can’t make any claims or if any negligible amounts are available within the lock-in period.
9. How do you get your claim amount?
The policy is supposed to be either a buffer to help you cover unforeseen costs or give you and your loved ones a payout when you retire or die. You need to confirm what the process is to get your claims, or how your loved ones or beneficiaries can receive the benefits. Your agent should outline every document that you’ll need for a claim and how long it will take to receive the benefits.
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