No one wants to give the matter much thought, but at one time or another, we are forced to. Life insurance is designed to replace the income generated by a wage-earner and to help cover basic living expenses, debt and major expenses such as college education or a child’s marriage if the worst were to happen.
Once you take a life insurance policy, here is what you have to do to ensure that your family is not at their wits end as to how to deal with the issue should anything unfortunate happen.
1) Inform family members
You bought the policy for the wellbeing of your family, should something unfortunate happen to you. The first step is to explain the complete policy to them and the claim process. Make them aware of all the benefits they will be eligible for, if and when the claim arises.
There are a number of reasons why claims get rejected or delayed, as we discussed here. A prime reason is insufficient documentation or the claimant not being able to understand the claim settlement process. Work this out with your family members. If you went through an agent, introduce the agent to them.
2) Keep your documents safe
Your best bet with storing important documents is a safe deposit box. You need not keep it in a bank if you have one at home. Alternatively, you could just file it and keep it in a safe place. Make a copy of your life insurance policy and store it in a different place than the original policy.
Do inform your family members where you have stored the documents. Even if the policy was issued to you electronically, ensure that a hard copy is kept for your family.
3) Be prompt with your premium
Be regular with your premiums to ensure that the policy stays in effect. If, by any chance, you have not paid up and your policy has lapsed, then there is no way the insurance company is obligated to make the payment to your beneficiary. If you miss a premium payment, look out for the grace period. If you have missed that, then talk to the company to once again re-instate your policy on making a penalty payment. Incidentally, the grace period is generally not more than 30 days. If the premium payment is monthly, then the grace period stretches to just around 15 days.
You need not physically go to the insurance company’s office to make your payment. You can pay online via net banking or via your debit/ credit card. Some companies also permit premium payment through mobile phones where funds can be transferred through the Interbank Mobile Payment Service, or IMPS. If you are concerned about missing the due date, opt for auto debit of premiums where you give the bank a standing instruction mandate.
4) Be up-to-date with your nominations
Keep an eye on nominations. You might have nominated your parent and failed to change the nomination once you get married and have a child. Alternatively, it could be that the initial nominee is no longer alive.
In case you are raising a loan against your policy, your policy would have to be assigned to the company. When this happens, the title of the policy is shifted from your name to that of the insurance company (or institution from where you are taking the loan). The policy would be reassigned to you on the repayment of the loan. Please remember that a fresh nomination may have to be done after the reassignment of the policy.
5) Keep your changing circumstances in perspective
Circumstances change. You may have another child. The number of dependents may increase. Your liabilities could have risen if you have taken a home loan. The amount you are insured for may not be sufficient for your beneficiaries. Review the amount you are insured for once a year.
Keep your life insurance company informed of any specific changes such as a change of address, birth or death of any family members, or if you get married, or divorced, or remarried.
Finally, keep tab of when the policy expires. Don’t put yourself in a position where you find yourself completely uninsured for a period.