Proposal in insurance means a request, from the proposer to the insurer, for giving protection against a risk. This request may be made orally (face to face or over telephone) or in writing through a letter or very formally through a printed proposal from supplied by the insurers.
Even though a proposal may be made in either of the ways, a convention has developed for using insurer’s printed forms in case of fire, life and accident business and slips or declaration forms in case of marine.
For properly understanding the proposal form the student should try to go through the specimen forms of various branches of insurance.
In this post attempt shall be made to discuss in general terms the important common questions one is expected to find in any proposal form.
Name of proposer is very important for identification. It should be correctly and accurately written so that the policy can incorporate the correct name and identity.
Address should be accurately given because of several reasons, such as, identity and communication, and sometimes this is important for rating purpose, e, g., motor, burglary etc.
Information as to occupation is particularly important in case of life insurance, personal accident insurance and liability insurance as this will influence the rate or decision of an underwriter.
This is the subject-matter of insurance and, therefore, should be properly described so that correct insertion can be made on the policy.
The amount for which insurance cover is required should be adequately mentioned. This is the limit of the insurer’s liability. It must represent the actual value of the property or the subject-matter of insurance.
6. Claims History
This has an influence on underwriter’s decision and must, therefore, be truthfully answered. Details of all previous related losses, whether insured or not, must be correctly given.
7. Other Insurances
Information as to other past or present related insurances is required to be given. This is important for applying contribution amongst various policies wherever applicable.
This is also important for assessing the moral hazard of the proposer since it might indicate the reason of effecting numbers of policies. Information as to other insurances also enables the insurer to make necessary queries with other insurers about the proposer.
The insurer would like to know whether any insurance of this proposer was previously declined by any other insurers. This information would enable the insurer to find out from other insurers the cause of declinature.
Every proposal form contains a declaration to the effect that;
- The answers given in the proposal form are true and nothing has been concealed or misrepresented.
- The proposer agrees to pay the premium and accept a policy that is usually issued by the insurer for that class of business.
- The proposal form and the declaration shall form the basis of the contract.
The proposal is required to be signed by the proposer or by the authorized person when the proposer is not an individual.
The signature is to be dated.
By comparing various specimen proposal forms the students would realize that apart from the above common type questions, there are numbers of other types of questions peculiar to various branches and different policies.