In this chapter we discuss the various documents involved when a proposal becomes a life insurance policy.
A. Policy stage documentation
1. First Premium Receipt
An insurance contract commences when the life insurance company issues a first premium receipt (FPR). The FPR is the evidence that the policy contract has begun.
The first premium receipt contains the following information:
i. Name and address of the life assured
ii. Policy number
iii. Premium amount paid
iv. Method and frequency of premium payment
v. Next due date of premium payment
vi. Date of commencement of the risk vii. Date of final maturity of the policy viii. Date of payment of the last premium ix. Sum assured
After the issue of the FPR, the insurance company will issue subsequent premium receipts when it receives further premiums from the proposer. These receipts are known as renewal premium receipts (RPR). The RPRs act as proof of payment in the event of any disputes related to premium payment.
2. Policy Document
The policy document is the most important document associated with insurance. It is evidence of the contract between the assured and the insurance company. It is not the contract itself. If the policy document is lost by the policy holder, it does not affect the insurance contract. The insurance company will issue a duplicate policy without making any changes to the contract. The policy document has to be signed by a competent authority and should be stamped according to the Indian Stamp Act.
The standard policy document typically has three parts:
a) Policy Schedule
The policy schedule forms the first part. It is usually found on the face page of the policy. The schedules of life insurance contracts would be generally similar. They would normally contain the following information:
i. Name of the insurance company
ii. Some specific details for the particular policy like:
• Policy owner’s name and address
• Date of birth and age last birthday
• Plan and term of policy contract
• Sum assured
• Amount of premium
• Premium paying term
• Date of commencement, date of maturity and due date of last premium
• Whether policy is with or without profits
• Name of nominee
• Mode of premium payment – yearly; half yearly; quarterly; monthly; via deduction from salary
• The policy number – which is the unique identity number of the policy contract
iii. The insurer’s promise to pay. This forms the heart of the insurance contract
iv. The signature of the authorised signatory and policy stamp
v. The address of the local Insurance Ombudsman.
b) Standard Provisions
The second component of the policy document is made up of standard policy provisions, which are normally present in all life insurance contracts, unless specifically excluded. Some of these provisions may not be applicable in the case of certain kinds of contracts, like term, single premium or non- participating (in profits) policies. These standard provisions define the rights and privileges and other conditions, which are applicable under the contract.
c) Specific Policy Provisions
The third part of the policy document consists of specific policy provisions that are specific to the individual policy contract. These may be printed on the face of the document or inserted separately in the form of an attachment.
While standard policy provisions, like days of grace or non-forfeiture in case of lapse, are often statutorily provided under the contract, specific provisions generally are linked to the particular contract between the insurer and insured.
A clause precluding death due to pregnancy for a lady who is expecting at the time of writing the contract The detailed provisions are mentioned in chapter 13.
What does a first premium receipt (FPR) signify? Choose the most appropriate option.
I. Free look period has ended
II. It is evidence that the policy contract has begun
III. Policy cannot be cancelled now
IV. Policy has acquired a certain cash value
• An insurance contract commences when the life insurance company issues a first premium receipt (FPR). The FPR is the evidence that the policy contract has begun.
• The policy document is the most important document associated with insurance. It is the evidence of the contract between the assured and the insurance company.
• The standard policy document typically has three parts which are the policy schedule, standard provisions and the policy’s specific provisions.
1. First Premium Receipt (FPR)
2. Policy document
3. Policy schedule
4. Standard provisions
5. Special Provisions