Practice of Life Insurance
Practice of Life Insurance
This domain tests the policy lifecycle from proposal to claim: underwriting, policy documents, premium payment, lapse and revival, nomination and assignment, surrenders, loans and death or maturity claims. Questions often turn on dates and on who receives the money.
Core rules
- Proposal and underwriting: the proposal form, agent's report and medical evidence are assessed. The underwriter may accept at standard rates, impose loadings or exclusions, postpone or decline.
- Free-look: after receiving the policy document, the policyholder may return it within 30 days for a refund of premium less medical examination and stamping charges.
- Grace period: 30 days for policies paying premiums other than monthly, 15 days for monthly mode. If death occurs during the grace period, the claim is generally paid after deducting unpaid premium.
- Lapse and revival: a policy lapses if premium is unpaid beyond grace. Revival is normally allowed within five years of the first unpaid premium, with arrears, interest and fresh health evidence.
- Nomination and assignment: nomination (Section 39) directs the claim to a nominee, who holds it for the legal heirs; assignment (Section 38) transfers the policy rights, as when a bank takes security for a loan.
Worked example
A policy document is received on 5 May. The free-look period runs for 30 days, so a written request received on 3 June is within time. The insurer refunds the premium less medical and stamping charges; no surrender value is payable because the contract is being cancelled, not surrendered. A request received after the period would be dealt with under the surrender and paid-up rules instead.
Traps that cost marks
- Confusing the grace period with the revival period.
- Treating a nominee as the absolute owner of the claim money.
- Assuming a lapsed policy pays a death claim without revival.
- Ignoring that free-look is a cancellation right, not a surrender.