Documents Required for Insurance policies

Key documents for Insurance Policy

There are many important documents associated with insurance – we have already been introduced to some of them in the previous section. These documents provide information on the insured and on the insurance itself and sometimes provide proof that the insurance exists and, when it comes to making a claim, that a loss has occurred. We will look at what these documents are in this section.

Proposal form

The first thing that Mr Kumar does on hearing that Nitish has seen the advantages of having life insurance and is willing to buy a policy, is to give Nitish a proposal form to complete.

Let us look at how Mr Kumar would answer Nitish’s questions.

The proposal form or application form is the first document that the proposer needs to fill in and submit to the insurance company. In our case study Nitish is the proposer. The proposer should fill in the proposal form themselves in their own handwriting. However, there can be a few exceptions to this, for example where the proposer is illiterate or does not understand the language used in the form. Care therefore needs to be taken to ensure that the proposer is fully aware of and is in agreement with the purchase of the insurance plan.

The proposal form is the main source of the information the underwriter will use to assess the risk the person presents to the pool. Therefore it is important that the information provided by the proposer is correct. You should think back to the importance of utmost good faith and the relevance of material facts.

Declaration in the proposal form

At the end of the proposal form there is a declaration for the proposer to sign. By signing this declaration the proposer states that the information they have provided in the form is correct and that they have fully understood the questions before answering them.

The signing of this declaration is important. By agreeing to this declaration the proposer is recognizing that:

• The insurance company can cancel the contract and keep the premiums if it finds out that any of the information provided is not true; and

• By stating that they have understood the questions, they cannot claim that they were given wrong information or misled in any way, if a dispute happens in the future.

What about Nitish’s question about illiterate proposers – how can they complete a proposal form and sign the declaration? If the proposer is illiterate, then an impression of the left thumb is taken and a third party has to attest the thumb impression. The person (third party) attesting the thumb impression has to declare that they have fully explained the questions to the proposer, in their language, and that they have correctly entered the answers after consulting the proposer. In this case the address of the declaring person may also be taken.

Sometimes the proposer’s language will be different to that of the proposal form. In these cases, where the proposer completes the proposal form and also signs the declaration in their own language, then the proposer has to declare, in their own handwriting above their signature, that all the questions were explained to them and that they answered them only after fully understanding them.

This proposal form and the proposer’s signature of the declaration will form the basis of the insurance contract and so are very important documents legally. This is why it is so important that the proposer understands the questions and answers them truthfully.

Age proof

Age is one of the factors that insurance companies use to determine the risk profile of the proposer and thus the premium amount to be charged. This is why it is important that insurance companies verify the correct age of the proposer.

Documents that can be accepted as valid age proofs can be classified as standard age proof documents and non-standard age proof documents.

Along with proof of their date of birth an individual is required to submit proof of their address, a photograph and a deposit towards the premium. The insurance company may also ask the individual to submit bank  tatements for six months to a year. Apart from cash or cheque, the premium deposit payment can also be made by credit card, a direct debit from the proposer’s bank account or through online payment gateways, electronic clearing system (ECS) etc.

In order to curb money laundering in the insurance sector the IRDA, in recent years, has tightened Anti-Money Laundering (AML)/Combating Financing of Terrorism (CFT) guidelines for insurance companies so that extreme care must be exercised during the Know Your Customer (KYC) process. To prove their identity in accordance with the KYC process, the customer needs to submit:

• an age proof;
• an identity proof;
• an address proof; and
• income proof documents (if required by the insurance company, depending on the insurance amount asked for).

The above documents are to be obtained to establish clearly the identity of the customer and their source of income for the premium being paid.

Premium receipts

In this section we will discuss the two premiums receipts – the first premium receipt and the renewal premium receipt. We will look at the policy document in the next section G4.

First premium receipt (FPR)

As we have just seen in Mr Kumar’s response to Nitish, the insurance company will inform the proposer that their proposal has been accepted and that it has received the premium through issuing the first premium receipt (FPR). The FPR is important as it is the evidence that the insurance contract has begun. The policy document, which is the evidence of the contract, may be issued some time later.

Renewal premium receipt (RPR)

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 (RPRs). The RPRs act as proof of payment in the event of any disputes related to premium payment, and so are important. The RPRs should be kept in a safe place along with the FPR and the policy document so that they can be produced easily when required.


Anand Khemka
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