Have you ever tried to utilize a coupon in a store only to be said that it's no good for your things? It's not a well feeling. That's exactly how it feels when you sign a contract to purchase a car or a home. Therefore, you realize there were hidden fees and rules in the fine print for things like paying the loan early. It's incredibly frustrating – companies are following you not reading the fine print in contracts, and are utilizing those terms to rip you off.
The result of not reading the fine print may give you sleepless nights shortly. Are you like signing contracts without going through the fine print? You are not the only one in doing this. Many people scribble on the dotted line, not to glance at the rules and regulations of their signing. Those legal terms appear designed to lull you to sleep, moreover. But the result of this action could be dire. More often than not, buried in the fine print are terms and conditions that act in favour of the other party at your expense.
Insurance and the Fine Prints
When you buy an insurance policy, you want to go through the fine print thoroughly to know what you are getting yourself in. Life Insurance Plans are a long term plan. Hence reading the fine prints with the terms and conditions are very important before opting for the same. Not doing so could accurately result in financial losses and unforeseen penalties. Life Insurance is an important part an individual’s financial planning strategy.
What is the Fine Print?
Life Insurance Plans have a huge form with a lot of annexures. All legal terms and conditions of the policy is listed in those annexures. But honestly, who reads them all? This is where a policyholder does not pay too much of attention. The insurers refer to these fine prints in the terms and conditions when they need to repudiate a claim.
There are certain must-know parts of the fine prints that you, as a policyholder must read, before signing the proposal form.
1. Lock-in Period
The lock-in period is a must be period during which you should stay invested. Should you try to not continue the policy during this period or withdraw your money, you could incur fatty remedies. It won't be very sure that you will be capable of recovering all the premiums you have paid up to that point. The cause for all this is that since insurance is a long-time investment, keeping clients for the long term is the only method the life insurance company can be sure of making benefits. It is needed to find out the length of this period for your policy and select if it works for you, especially if the premiums are high.
So, each life insurance policy has a minimum of 5 years of lock-in period from the date of policy inception before which it cannot be surrendered.
2. Surrender Charge
Surrender charges are the expenses that you as a policyholder needs to pay in order to cancel the policy and surrender the same before the policy maturity. This could be quite a sizable amount, so it is always well to read the fine print to search the policy's maturity period and the surrender charge attached.
3. Waiting Period
This is the period during which claim cannot be raised. You need to know the basic waiting period of your life insurance plan, so that there are no surprises! This is especially true in critical illness and health insurance policies, but can have some implications in life insurance plans as well. Thus, knowing the waiting period for claims is a very important aspect, which is definitely mentioned in the fine prints of the life insurance policy.
4. Exclusions
The policy exclusions like suicide in the initial year, accidental claims, etc. might vary from policy to policy. Different types of life insurance plans have different policy exclusions, which again is a very important part of the fine prints that need to be read carefully by the policyholder before opting for the policy.
5. Associated Risks
Each investment tool have some associated risk. Each policy which has an element of uncertainty attached with it, has some associated risk for the same.
For example, ULIPs have investment risk. Participating Endowment Plans have an element of uncertainty with bonus declaration rates, and that is a risk. Insurance policies cover the risk of the insured’s life but there might be some associated risks for the product as well, which again is mentioned in the fine prints.
6. Other costs
You need to lookout for every possible detail before you sign anything. So, read about all associated costs well before you opt for the plan.
Ideally you need to read the fine prints before opting for your life insurance plan. However, at least the above points definitely need to be considered and read before you buy the insurance policy.
