Importance of a Proposal Form and the Declarations Made Therein

What is a Proposal Form?
 

A proposal form in insurance is a formal document the insurance company uses to evaluate the risk associated with the proposer. It serves as the first step in establishing a legally binding insurance contract. The proposer applies for the required insurance coverage by filling out the proposal form. The applicant provides all relevant details to help the insurance provider determine the premium and the policy terms after assessing the risk.

Declarations made in the proposal form are the crucial aspects of the underwriting process by which insurers decide whether to issue a policy and under what conditions. Proposers must provide accurate and honest information to avoid the consequences in the future.
 

All About the Life Insurance Proposal Form
 

A life insurance proposal form is a comprehensive document, including personal details, lifestyle and health information, coverage requirements, and declarations. It typically includes several key sections mentioned below:
 

1. Proposal Details:
 

• Proposal type – Individual/Joint life/ Employer-employee/Key man/ HUF/Partnership
• Insurance purpose – Protection/ Investment/ Retirement/ Savings/ Child future
   

2. Personal Information:
 

• Name, gender, age, marital status, place of birth, nationality, residence status, address, email ID, and contact information.
• Accurate information and communication addresses ensure proper identification and communication.
   

3. Education and Occupation Details:
 

• Education qualification of the proposer/ proposers
• Occupation details – Designation and employer’s name for the salaried, business details
   

4. KYC and Income Details:
 

• Annual income (with income proof), which helps determine the ability to pay premiums.
• Identifying details such as PAN card/GSTIN or Aadhaar number.
   

5. Nominee Details:
 

• Name, gender, date of birth, % share of nomination
• Appointee details in case the nominee is a minor
   

6. Insurance Coverage Details:
 

• The type of plan (term insurance, unit linked insurance plan, whole life, etc.).
• Desired sum assured and policy term.
• Premium frequency
• Details of policies held with the insurance company, including the details of declined, deferred, or postponed proposals.  Helps insurers gauge the risk exposure.
   

7. Family, Lifestyle and Health Information:
 

• Family medical history to identify genetic or hereditary risks.
• Lifestyle habits such as smoking, alcohol consumption, or any risky hobbies.
• Medical history and details about current health conditions.
   

8. Declarations and Signature:
 

• The proposer declares that all information provided is true and accurate.
• The signature signifies agreement to the insurer’s terms and conditions.
   

Important Tips for Filling the Proposal Form¹
 

Here are some important tips and a step-by-step guide to filling in the insurance proposal form:
 

● Read the Form Carefully:
 

Read all instructions carefully before you fill in the form and ensure you understand the questions. Misinterpretation can lead to errors, which may impact claim settlements in the future.
 

● Provide Accurate Details:
 

Ensure all personal information provided is correct and matches with the proofs (identification, address proof, age proof, and income proof) you upload or provide. Any discrepancies can cause delays in policy issuance or claims.
 

● Disclose Complete Health Information:
 

Be honest with your medical history and include details of any chronic conditions or treatments. Include details of surgeries, medications, or any ongoing health concerns. Non-disclosure of pre-existing conditions can lead to claim rejection.
 

● Be Honest About Lifestyle Choices:
 

Provide your lifestyle details, such as smoking or alcohol consumption, honestly, as they directly affect risk assessment. Mention any hobbies or activities that may be considered high-risk, such as aviation or mountaineering.
 

● Choose the Right Policy and Coverage:
 

Before you choose the coverage, understand your financial needs and obligations. Ensure the premium is affordable and aligns with your long-term financial goals.
 

● Review and Sign the Declarations Section:
 

Verify all information before signing the declarations. Remember that the insurer can deny a claim if inaccuracies are found during the investigation.

 

The declarations section is the most critical part of the proposal form. It serves as a legal statement from the proposer, establishing the authenticity of the information provided. Significance of declarations include:
 

● Legal Obligation:
 

The declaration signed by the proposer confirms all the details provided are precise and accurate to the best of their knowledge. This makes the contract legally enforceable.
 

● Underwriting and Risk Assessment:
 

Declarations play a critical role in assessing the risk. Misinformation can lead to incorrect underwriting, which can potentially invalidate the policy.
 

● Smooth Claims Process:
 

False or incomplete information can result in claim rejections. Accurate declarations ensure a smooth claims process.

Providing incomplete or false information in the proposal form can have serious consequences, such as policy rejection, claim rejection, financial loss, and legal action against the proposer.
 

Conclusion
 

To sum up, the proposal form is the cornerstone of a life insurance contract, bridging the gap between the proposer and the insurance provider. It is important to ensure the form is filled with accurate information and precise details to ensure seamless policy issuance and claims processing. Correct and honest declarations made in the form determine the validity of the contract and the security of the insured’s family in an unforeseen event. Knowing the importance of proposal forms and declarations made therein ensures the insurance journey is transparent, smooth, and beneficial.
 

Source