A life insurance company offers a policy on the basis of a proposal form. The form is the most basic requirement for the functioning of the life insurance contract between the proposer and the life insurance company. It needs to be completed by the proposer, who may seek the assistance of a life insurance advisor to fill it up.
A proposal form seeks basic information of the proposer and the life assured. This includes the name, age, address, education and employment details of the proposer. The proposal form also gathers information on the medical history of the life to be assured. There are questions pertaining to the health status of family members of the life to be assured. The proposer and the life to be assured have to mention their incomes in the proposal form to satisfy the insurer about their ability to pay for the insurance and the need for insurance, respectively. The proposal form also has questions related to the insurance bought on the life of both the proposer and the life assured from other life insurance companies and details of those policies. Life assured has to disclose his/ her habits related to consumption of alcohol and tobacco. After filling up the form and answering all the questions in it, the proposer has to sign the form. For overwriting or cancellations on the proposal form, the proposer has to sign to validate such changes.
The proposer can choose to attach a sheet of paper to the proposal form if he wants to share with the insurance company any information not sought in the form, which he thinks will help the company to take an informed decision. It is in the proposer’s interest to share true information to the life insurance company, which, in turn, helps the insurance company to take a fair call.
The information is used by the insurance company to ascertain if a policy can be issued. Life insurance underwriters use the information regarding the health and family history of the life to be assured to arrive at the premium to be charged. The company gives a photocopy of the proposal form to the insured, along with the life insurance policy document. The proposer should read the entire policy document thoroughly and also the photocopy of the life insurance proposal form. Any discrepancy in the photocopy should be brought to the notice of the insurance company to avoid any fraud.