Life insurance policies are facing increasing scrutiny and complexity, according to Nithin Kamath, the founder and CEO of Zerodha. He notes that the convoluted nature of these policies is discouraging many from securing this crucial financial safeguard.
Kamath, speaking on the social media platform X, emphasized the importance of life insurance in personal finance. “The first thing you should do when you are starting your personal finance journey is to ensure you have sufficient life and health insurance,” he stated. “If you have dependents, not having life insurance is a bad idea.”
However, Kamath also pointed out why many individuals hesitate. “Perhaps the biggest reason why they don’t have life insurance is because the policies are a nightmare to understand with all sorts of jargon and hidden clauses,” he added. This sentiment reflects a broader trend of policy complexity.
In India, the process of obtaining life insurance involves a detailed evaluation by insurance companies, a process known as underwriting. This assessment considers factors like an applicant’s health, lifestyle, occupation, and financial standing. Insurers meticulously analyze this information to determine the risk involved in providing coverage. Age, medical history, smoking habits, family medical history, and income all contribute to premium calculation and eligibility.
Challenges in securing life insurance have intensified, particularly since the onset of the COVID-19 pandemic. Increased claims have prompted insurance companies to reassess their underwriting policies, resulting in a stricter approval process. Minor health issues, previously overlooked, can now affect an applicant’s eligibility. Furthermore, several insurers have extended waiting periods before claims can be processed, delaying access to benefits for policyholders.
The complexity of insurance policies often stems from technical terms and hidden conditions. Terms such as “riders,” “exclusions,” and “waiting periods” can confuse customers, making it difficult to ascertain coverage details. Frequent updates to terms and conditions further exacerbate this lack of clarity.
Financial experts offer several recommendations to enhance the chances of securing suitable life insurance. Comparing various policies is crucial. Thoroughly reviewing exclusions, waiting periods, and claim settlement ratios aids in selecting the right plan. Maintaining a healthy lifestyle can improve approval prospects, as insurers assess medical risks. Honest disclosure of medical information is equally essential to avoid complications during claims. These steps can help individuals navigate the increasingly complex landscape of life insurance and secure the financial protection they need.
