Insurance is an agreement between the insurer and the insured (policyholder). This agreement is based on the information the insured provides in the proposal form, making it the most important part of the entire insurance policy. An insurance company offers a policy on the basis of a proposal form and other information related to the insured. It seeks all the relevant information from the policyholder in order to underwrite the risk.

The proposal form includes the insured’s basic information such as an address, age, name, education, income, and occupation besides his medical history. Depending on the level of coverage you choose or your age group or occupation/family background, you may be required to undergo a medical examination.

Insurance operates on the principle of utmost good faith. This means that everyone who enters into a contract has a legal obligation to each other to disclose any material facts that may affect the contract's subject matter. The person must therefore provide the insurance company with accurate, complete and honest information.

There are many points you need to take care of when filling out the insurance proposal form, but here are some of the most crucial ones.

1. Mention Correct Details

Many people become casual while filling up the form and do not provide the correct details related to age, contact details, income, qualification, etc. Mentioning the correct details is extremely important. 

The insured must provide the correct address, contact number and e-mail id because the insurer will contact you using these details when a claim needs to be settled - the address is required for underwriting as well as any communication. Crores of claims and maturity amounts remain unpaid as insurers are unable to reach policyholders at the numbers and addresses provided by them. Further, the age, height, weight, health status, family medical background, income, occupation, qualification, etc; of the proposer/insured members have a significant impact on the decision of the insurance underwriter. It could result in the rejection of the proposal or a hike in the rate of premium.

2. Disclosure of Medical Condition

Many times, people do not disclose their current health condition in the proposal form so as to obtain better coverage for a lower premium or to avoid the waiting period or rejection. However, the entire medical history should be mentioned in the medical history/questionnaire section. While making the claim, if it is found that the medical history does not match, the claim might get rejected and/or the policy may be cancelled ab-initio. For example, Mr. Raj had diabetes for a long time but did not mention it in the form. However, when he was admitted to the hospital for treatment of heart disease, the fact that he had diabetes was revealed and as a result of which the entire medical claim got rejected. He had to bear all of the medical expenses himself because he did not mention diabetes in the proposal form while buying the policy.

3. Disclosure of Personal Health Habits

Insured member must disclose his/her habits regarding the consumption of alcohol, tobacco and other drugs. We are all aware that addictive substances such as tobacco and alcohol have a negative impact on health. So, if you are a tobacco user or alcohol consumer, insurers will charge more. The premium amount charged to such individuals is determined by their frequency, quantity consumed and type of addiction.

4. Disclosure of existing insurance policies

It is essential to mention all the policies taken from the same insurer as well as other insurers.. If you already have an insurance policy, the insurer will offer only the balance of the cover, that is, max cover allowed as per eligibility & underwriting guidelines - sum assured of the existing cover. Non-disclosure or improper disclosure of existing policies may result in proposal cancellation. In fact, if the insurer comes to know about a pre-held policy that was not declared at proposal stage, it can reject the claim and/or cancel policy on the basis of non-disclosure of material facts.

5. Mention occupational details accurately

People often do not mention the nature of the job or service they are involved in. Occupation is a parameter used to assess accident risk and wellness. For example, if you work in aviation, the risk to your life will be higher and the declaration needs to be done to the insurer. So, the nature of work is critical for risk assessment and the premium will depend on that information. Individuals with hazardous occupations or dangerous hobbies like paragliding, parasailing, rock climbing, etc. are charged more. The insurer can even refuse them coverage.

6.Mention Nominee Details

It is important to fill the nominee details in the proposal form in order to make sure that the benefit reaches the right hands.

Conclusion

From the above points, it is clear just how important the proposal form is. Hence, it is paramount that those buying an insurance policy should pay close attention while filling their details in this important document, failure of which may lead to adverse consequences such as rejection of claim.

In case you have any questions regarding the understanding of the proposal form, it is important to get it clarified from your insurer/insurance advisor. To let the underwriter assess your risk appropriately, it is imperative that you furnish the right appropriate details. It is better to be safe than sorry at the time of filing a claim.