Wednesday , 19 September 2018
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The forgotten insurance policies

By Tensing Rodrigues

Yes, that’s what this article is about. According to IRDAI as much as Rs.15,167 crore of policyholders money is lying unclaimed with 23 life insuring companies as on March 31, 2018. Out of the total unclaimed amount, Life Insurance Corporation (LIC) alone is sitting on Rs10,509 crore while the 22 private sector insurers account for the remaining Rs 4,657.45 crore.

That’s not a surprise. Reasons are many. When we move we forget to change our address. The intimation from the insurer comes and goes back. Often the mail it is lost in transit. We fail to provide the particulars that the insurer asks for when the policy matures. I am not absolving the insurer of the responsibility. But it is our money, and primarily we should be hyperactive to ensure that it is not lost. We need to keep track of our policy and do all needful to get what is due to us.

First and foremost we need to understand what an insurance policy is all about. An insurance policy is a device to protect our dependents from financial distress in the unfortunate event of our death. Therefore it is very important to inform them about the policy as soon as we buy it. Because when the eventuality arises we will not be around to get the money. It is the nominee who will have to do the needful to get it. If the dependent is our child who is still a minor let the child be the nominee with a guardian to act on its behalf. The guardian should be ideally the  spouse or in the absence of the spouse someone close. Let the guardian know about the policy. If the dependent is major or when he/she turns major let the nominee take the responsibility for the policy directly.

There is often a lurking fear in our mind about letting the nominee know about the policy, what if the nominee plays mischief? The policy could be the cause of an untoward happening or harassment of the policy holder. That is a rare possibility but cannot be ruled out.  The problem lies in the way we buy the policy. The policy should be just enough to cover the needs of the dependent in the event of our death not for the purpose of his/her enrichment. Second, the policy should be terminated as soon as the dependent ceases to be dependent viz. as soon as he/she starts earning for himself/herself. Because then the policy does not have any raison d’être. If we take care about this the chances for mischief get greatly reduced.

Often there is a basic mistake in buying an insurance policy and it is bought as an investment. Absolutely wrong insurance is not investment. Not only does it give poor returns, but it is inefficient. And it can lead to misuse or mischief as described above. Insurance should be used exclusively for protection. Keep your investment separate. I know that it is easy to be misled given the way insurance is marketed. From what I have seen more than half of the insurance policies are sold as investment. It is to protect yourself from such mischief, that you need to understand the working of the insurance policy more than you need to understand the working of your car or your fridge. Even these, viz. car, fridge, oven, you need to understand or else you end up spoiling them. More than that you need to understand your investment and insurance. A car will make noise or get heated up or give off smell if you misuse it. So too the other gadgets you can sense the trouble coming.  An investment or insurance can spring a nasty surprise when it is usually too late. So take time to understand the product. Do not go by what you see on the TV or newspaper or what the salesman tells you. Take all that in and make sense for yourself. If you feel comfortable and safe and if it makes sense and you feel it serves your need go ahead and buy it. If not, just forget about it.

Right now, make sure that you are not one of those policyholders whose forgotten policies have piled up with the insurers. Let me dust my shelves to make sure I am not one of those!

*The author is an investment consultant. Readers can send their comments and queries to investment.ideas.shop@gmail.com

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