Chapter 5:- Documentation

This chapter focuses upon
A. Proposal forms
B. Acceptance of the proposal (underwriting)
C. Premium receipt
D. Cover Notes / Certificate of Insurance / Policy Document
E. Warranties
F. Endorsements
G. Interpretation of policies
H. Renewal notice

*Proposal Form is the first form that is to be filled at the time of fresh policy.
Click here to see a  ----->   Proposal Form   <-----

*In Mediclaim Insurance, if there is a Claim... Loading will be charged. more the claim will be, more the loading comes in.

*In case of No Claim, NCB is Given. No Claim Bonus.

*Risk is Covered from the very first day when the cheque is posted in post office.

*Cover Note:- It's a Note or a substitute for Vechiel insurance and is valid for 60 days. It is given for the time being policy comes by post.

• A cover note would incorporate the following:
• Name and address of insured
• Sum insured
• Period of insurance
• Risk covered
• Rate and premium: if rate is not known, the provisional premium
• Description of the risk covered: for example a fire cover note would indicate identification particulars of the building, its construction and occupancy.
• Serial number of the cover note
• Date of issue

Validity of cover note is usually for a period of a fortnight and rarely up to 60 days
Cover notes are used predominantly in marine and motor classes of business.

*Certificate of Insurance:- It is a Note that insure that the vechile is Registered with RTA i.e., Road Transport office. Know a days insurance is not only the insurance but the insurance cum Certificate of Insurance.

*Acceptance of Proposal (Underwriting):- As per guidelines, the company has to process the proposal within 15 days‟ time. The agent is expected to keep track of these timelines, follow up internally and communicate with the prospect / insured as and when required by way of customer service. This entire process of scrutinizing the proposal and deciding about acceptance is known as underwriting.

*Premium Receipt:- Premium is the consideration or amount paid by the insured to the insurer for insuring the subject matter of insurance, under a contract of insurance.

*Methods of Premium Payment:- The premium to be paid by any person proposing to take an insurance policy or by the policyholder to an insurer may be made in any one or more of the following methods:

• Cash 
• Any recognised banking negotiable instrument such as cheques, demand drafts, pay order, banker.s cheques drawn on any schedule bank in India;
• Postal money order;
• Credit or debit cards;
• Bank guarantee or cash deposit;
• Internet;
• E-transfer
• Direct credits via standing instruction of proposer or the policyholder or the life insured through bank transfers;
• Any other method or payment as may be approved by the Authority from time to time;

*As per IRDA Regulations, in case the proposer / policyholder opts for premium payment through net banking or credit / debit card, the payment must be made only through net banking account or credit / debit card issued on the name of such proposer / policyholder.

*Endorsement:- If certain terms and conditions of the policy need to be modified at the time of issuance, it is done by setting out the amendments / changes through a document called endorsement.

Summery:-

a) The first stage of documentation is essentially the proposal forms through which the insured informs about herself 

b) The duty of disclosure of material information arises prior to the inception of the policy, and continues even after the conclusion of the contract 

c) Insurance companies usually add a declaration at the end of the Proposal form to be signed by the insurer 

d) Elements of a proposal form include: 

   i. Proposer‟s name in full 

   ii. Proposer‟s address and contact details 

   iii. Proposer‟s profession, occupation or business 

   iv. Details and identity of the subject matter of insurance 

   v. Sum insured 

   vi. Previous and present insurance 

   vii. Loss experience 

   viii. Declaration by the insured 

e) An agent, who acts as the intermediary, has the responsibility to ensure all material information about the risk is provided by the insured to insurer. 

f) The process of scrutinising the proposal and deciding about acceptance is known as underwriting. 

g) Premium is the consideration or amount paid by the insured to the insurer for insuring the subject matter of insurance, under a contract of insurance. 

h) Payment of premium can be made by cash, any recognised banking negotiable instrument, postal money order, credit or debit card, internet, e-transfer, direct credit or any other method approved by authority from time to time.

i) A cover note is issued when preparation of policy is pending or when negotiations for insurance are in progress and it is necessary to provide insurance cover on provisional basis. 

j) Cover notes are used predominantly in marine and motor classes of business. 

k) A certificate of insurance provides existence of insurance in cases where proof may be required l) The policy is a formal document which provides an evidence of the contract of insurance.

m) A warranty is a condition expressly stated in the policy which has to be literally complied with for validity of the contract. 

n) If certain terms and conditions of the policy need to be modified at the time of issuance, it is done by setting out the amendments / changes through a document called endorsement. 

o) The most important rule of construction is that the intention of the parties must prevail and this intention is to be looked for in the policy itself.

Key Terms

a) Policy form

b) Advance payment of premium

c) Cover note

d) Certificate of Insurance

e) Renewal notice

f) Warranty

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Test your self

Q.What is the significance of the principle of contribution?
I. It ensures that the insured also contributes a certain portion of the claim along with the insurer
II. It ensures that all the insured who are a part of the pool, contribute to the claim made by a participant of the pool, in the proportion of the premium paid by them
III. It ensures that multiple insurers covering the same subject matter; come together and contribute the claim amount in proportion to their exposure to the subject matter
IV. It ensures that the premium is contributed by the insured in equal installments over the year.

Q.As per guidelines, an insurance company has to process an insurance proposal within __________.
I. 7 days
II. 15 days
III. 30 days
IV. 45 days

Q.In case the premium payment is made by cheque, then which of the below statement will hold true?
I. The risk may be assumed on the date on which the cheque is posted
II. The risk may be assumed on the date on which the cheque is deposited by the insurance company
III. The risk may be assumed on the date on which the cheque is received by the insurance company
IV. The risk may be assumed on the date on which the cheque is issued by the proposer


Q.Which of the below statement is true with regards to cover notes?
I. Cover notes are predominantly used in life insurance
II. Cover notes are predominantly used in all classes of general insurance
III. Cover notes are predominantly used in health insurance
IV. Cover notes are predominantly used in marine and motor classes of general insurance

Q.Which of the below statement is correct with regards to a warranty?
I. A warranty is a condition which is implied without being stated in the policy
II. A warranty is a condition expressly stated in the policy
III. A warranty is a condition expressly stated in the policy and communicated to the insured separately and not as part of the policy document
IV. If a warranty is breached, the claim can still be paid if it is not material to the risk

Q.Which of the below statement is correct with regards to renewal notice?
I. As per regulations there is a legal obligation on insurers to send a renewal notice to insured, 30 days before the expiry of the policy
II. As per regulations there is a legal obligation on insurers to send a renewal notice to insured, 15 days before the expiry of the policy
III. As per regulations there is a legal obligation on insurers to send a renewal notice to insured, 7 days before the expiry of the policy
IV. As per regulations there is no legal obligation on insurers to send a renewal notice to insured before the expiry of the policy



Answers to Test your self

Answer 1
The correct option is III.
The principle of contribution ensures that multiple insurers covering the same subject matter; come together and contribute the claim amount in proportion to their exposure to the subject matter

Answer 2
The correct option is II.
As per guidelines, an insurance company has to process an insurance proposal within 15 days.

Answer 3
The correct option is I.
In case the premium payment is made by cheque, then the risk may be assumed on the date on which the cheque is posted.

Answer 4
The correct option answer is IV.
Cover notes are predominantly used in marine and motor classes of general insurance.

Answer 5
The correct option is II.
A warranty is a condition expressly stated in the policy.

Answer 6
The correct option is II.
If certain terms and conditions of the policy need to be modified at the time of issuance, it is done by setting out the amendments through endorsement.

Answer 7
The correct option is IV.
As per regulations there is no legal obligation on insurers to send a renewal notice to insured before the expiry of the policy.

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Question 1
__________ is the maximum limit of liability of insurer under the policy
I. Sum insured
II. Premium
III. Surrender value
IV. Amount of loss

Question 2 _______________ is the consideration or price paid by insured under a contract
I. Claim amount
II. Surrender value
III. Maturity amount
IV. Premium

Question 3 A document which provides an evidence of contract of insurance is called________
I. Policy
II. Cover note
III. Endorsement
IV. Certificate of insurance

Question 4
The duty of disclosure arises
I. Prior to inception of the policy
II. After inception of the policy
III. Prior to inception and continues during the policy
IV. There is no such duty

Question 5
Material fact
I. Is the value of all material covered in a policy
II. Not important for assessing the risk
III. Is important as it influences the decision of the underwriter
IV. Is not important as it has no bearing on the decision of the underwriter

Question 6
Fire proposal seeks to know
I. Process of manufacture
II. Details of material stored
III. Construction of building
IV. All the above

Question 7
Premium cannot be received
I. In cash
II. By cheque
III. By promissory note
IV. By credit card

Question 8
The certificate of Motor Insurance
I. Is not mandatory
II. Has to be kept with self always
III. Has to be kept in the car always
IV. Has to be kept in the bank locker

Question 9
A warranty
I. Is a condition expressly stated in the policy
II. Has to be complied with
III. Both a and b
IV. None of the above

Question 10 Renewal Notice for Motor insurance is issued by
I. The Insured before expiry of the policy
II. The Insurer before expiry of the policy
III. The Insured after expiry of the policy
IV. The Insurer after expiry of the policy



Answers for all questions

Answer 1
The correct option is I.
Sum insured is the maximum limit of liability of insurer under the policy.

Answer 2
The correct option is IV.
Premium is the consideration or price paid by insured under a contract.

Answer 3
The correct option is I.
A document which provides an evidence of contract of insurance is called policy.

Answer 4
The correct option is III.
The duty of disclosure arises prior to the inception and continues even during the policy

Answer 5
The correct option is III.
Material fact is important as it influences the decision of the underwriter.

Answer 6
The correct option is IV.
Fire proposal seeks to know process of manufacture, details of material stored and construction of the building.

Answer 7
The correct option is III
Premium cannot be received by promissory note.

Answer 8
The correct option is III.
The certificate of Motor Insurance has to be kept in car always.

Answer 9
The correct option is III
A warranty is a condition expressly stated in a policy and has to be complied with.

Answer 10
The correct option is II.
Renewal Notice for Motor insurance is issued by the insurer before expiry of the policy

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