How to properly conclude a life insurance contract?
The National Bank of Ukraine launched an information campaign to protect the rights of consumers of insurance services “Know your rights: insurance” with the support of an international partner – the USAID Project “Investments for business sustainability”. Forinsurer publishes a navigator for consumers of insurance services and tells how to correctly conclude a life insurance contract.
A life insurance contract is an opportunity to provide yourself and your family with financial protection in case of unforeseen circumstances. It works both to accumulate funds for the future and to provide financial security in case of serious illness, accident or death.
Life insurance classes
Class 19: Life insurance
Class 20: Wedding insurance / Maternity insurance
Class 21: Investment life insurance
Class 22: Continuous health insurance
Class 23: Pension insurance
Insurers are prohibited from carrying out activities under classes 21 and 22 without a special law.
Payments under the life insurance contract provide financial protection of the family budget in case of loss of the main income due to death or serious illness.
Determination of life insurance needs
The insurer must enter into insurance contracts only after ascertaining the client’s needs. Before concluding a contract, it is advisable to get individual advice from an insurer or an intermediary. This will help you make an informed choice and conclude a contract that will meet your needs.
Preparation for the conclusion of the contract
You have the right to receive complete information about the insurance conditions. Standard product information is provided free of charge in a standardized format for easy comparison of offers from different insurers. Since it will be in a standardized format, you can easily compare the offers of different insurers for similar products. The necessary information can be provided in paper or electronic form (including on the website of the insurer or insurance intermediary) or in another way by agreement.
For convenient and quick familiarization with the terms of the insurance product, insurers and insurance intermediaries are obliged to post information on the key terms of the insurance product on their websites. As a result, you will be able to compare offers and choose the best option.
Search for an insurance company
Make sure the insurer is reliable. It is important to check the availability of a license and familiarize yourself with information about the insurer and its activities. So you can make an informed decision and find a reliable insurer.
Before concluding the contract, the insurer or insurance intermediary must provide you as a potential client with the following information:
- name, location, identification code of the insurer according to EDRPOU;
- information about the insurer’s license and the method of its verification;
- the list of services that can be provided at the client’s request, as well as the order and conditions of consulting on insurance services;
- the type of remuneration that the insurer’s sales employee will receive during the conclusion of the insurance contract, including the procedure and conditions for its payment;
- information about any other payments (except insurance premiums) that the client will be required to pay in the event of concluding an insurance contract;
- information on the mechanisms and methods of protecting the rights of consumers of financial services;
- other information specified in the laws of Ukraine and regulatory acts of the National Bank of Ukraine as the regulator of the insurance market
.
If you received an offer to conclude an insurance contract from an insurance intermediary in accordance with Article 88 of the Law of Ukraine “On Insurance”, then you have the right to receive comprehensive information about such an insurance intermediary.
Before making a final decision, we advise you to carry out an independent inspection. Find out about the availability of a license from an insurance company or ask for information about an insurance intermediary who offers you to conclude an insurance contract.
Thanks to the Comprehensive Information System of the National Bank of Ukraine, you can search the State Register of Financial Institutions for the current date and check information about the insurer.
Explore the insurance company’s online resources. The insurer’s website must contain clear and up-to-date information about the insurance company, its owners, management, reporting, insurance products it offers.
What is the result? As a result of a comprehensive check, you will be able to learn more about the insurer or insurance intermediary, additional payments, mechanisms for protecting your rights, and therefore make an informed choice and find an insurer you can trust.
Conclusion of a life insurance contract
After receiving all the necessary information, it is time to conclude the contract. Insurance can be risk, accumulative or combined. After receiving all the pre-contractual information and making a choice, it is time to conclude the contract. It can be enclosed in papersin paper or electronic form.
A life insurance contract containing a risk component
It is concluded in the event of the death of the insured person, and may also include insurance in the event of the occurrence of one or more ancillary risks (for example, illness or injury). The insured receives protection in the event of the occurrence of undesirable events associated with the risk of loss of health, work capacity or life.
Life insurance contract with an accumulation component
Under contracts of accumulative life insurance, the insurance company not only preserves the financial savings of clients, but also invests them in various assets and multiplies them. Additional investment income will be accrued to you annually, if it is provided for in the terms of the contract, the amount of which will depend on the results of the investment activity of the selected insurance company.
The legislation determines the list of things that must be specified in the insurance contract (Article 89 of the Law of Ukraine “On Insurance”).
What should you pay attention to when concluding an insurance contract?
- The size of the insured amount, within which you can receive an insurance payment in the event of an insured event.
- The list of insurance risks is unpredictable probable events, in the event of which insurance is provided. Insurance risks specified in the contract may belong to several classes of insurance at the same time.
- List of exceptions from insurance cases. For example, the contract may state that the insurance company will not make an insurance payment if the insured dies during certain circumstances (earthquake, flood or other natural disaster).
- The waiting period is the period of time between the payment of the insurance premium and the expected occurrence of an insurance event based on the risk of survival or the expiration of the contract.
- Date, frequency of payment and amount of insurance premium. The contract usually comes into effect only after payment of the insurance premium in full or its first part (on the next day or after a certain period). The insurance premium in the case of concluding a accumulative life insurance contract is calculated individually for each client and depends on many factors.
- Action procedure in the event of an event that has signs of an insurance event. In most cases, untimely notification of the insurer about such an event is the reason for the refusal of the insurance payment.
- Rights and obligations of the parties to the contract.
- Deadlines for the insurer to make a decision on making an insurance payment, procedure and conditions for making insurance payments.
- Availability of attachments, links to related documents and their content.
- In what cases the life insurance contract ceases to be valid.
- The procedure and terms of receiving the redemption amount paid by the insurer in case of premature termination of the life insurance contract.
In addition to the information that is available in all insurance contracts, other conditions must be specified in the life insurance contract.
Be sure to pay attention to the following:
- Information about insured persons and beneficiaries for each insurance case.
- The minimum (guaranteed) amount of the redemption amount or the procedure for calculating this amount at the end of each year of the life insurance contract (or for a shorter regular period).
- The size (amount) of the investment income used to calculate the insurance tariff (the amount of the guaranteed investment income), if it is provided for in the terms of the contract.
- Procedure for accrual and notification of bonuses and/or results of participation in the insurer’s profits under life insurance contracts that provide for or do not expressly exclude such conditions.
- The size, conditions and terms of making insurance payments in the form of an annuity (periodic payments), if such a form of making insurance payments is defined in the contract.
- An exhaustive list of documents for obtaining the redemption amount and the term of its payment.
- The form, calculation procedure, terms and conditions of insurance payment for each individual insurance case;
- Conditions for recalculation (changes) of the sum insured and/or periodic payments.
- The procedure for changing the policyholder or insurer under a life insurance contract.
Having carefully studied the insurance contract, you will be sure of your insurance protection, you will know how to act in the event of an insured event, you will avoid misunderstandings and disputes with the insurer regarding the insurance payment, and you will be able to receive high-quality insurance services.
Rejection of the life insurance contract
You have the right to withdraw from the contract within 30 days from the date of conclusion. This gives you more control and flexibility in choosing insurance products.
The insurance contract must specify your right as an insured to withdraw from the contract, the procedure and terms for returning the insurance premium (or part of it) if you managed to pay it, as well as other conditions for using the right to withdraw from the insurance contract.
The policyholder may, within 30 calendar days from the date of conclusion of the insurance contract, withdraw from such contract without giving reasons. If there are discrepancies in the insurance applicationand the insurance certificate (policy), the policyholder has the right to refuse within 45 days from the date of receipt of the insurance certificate (policy).
If you decide to cancel the insurance contract, notify the insurance company of your intention in writing (electronically).
The right to withdraw from an insurance contract is one of the keys to protecting the rights of consumers of insurance services. It gives customers of insurance companies more control and flexibility in choosing insurance products or services.
Early termination of the contract
You are entitled to a redemption amount in the event of early termination. However, the amount may be less than the premiums paid, especially at the beginning of the contract term. By carefully reading the terms of early termination, you will be able to avoid misunderstandings and make an informed decision.
Redemption amount – the amount of money paid by the insurer to the insured or another person specified in the insurance contract or legislation, in case of early termination of the life insurance contract.
You will not be able to terminate the life insurance contract early without financial loss. For example, if you need to receive funds before the end of the life insurance contract, the insurance company will refund you the redemption amount, the amount of which will be less than the amount of insurance premiums paid. The shorter the term of the contract, the lower will be the size of the redemption sum, which is specified in the insurance contract (as a certain percentage of the paid insurance premiums or the sum insured or in monetary terms). In addition, under some insurance contracts, in the first few years of their validity, the amount of the redemption amount may be zero.
Before concluding a life insurance contract, it is important to carefully familiarize yourself with the terms of early termination of the contract, the amount of the redemption amount and the terms of its receipt. This will help to avoid misunderstandings with the insurer, correctly assess your financial capabilities and make an informed decision about concluding such a contract.