While every individual or household differs from the others, a few universal things can apply to everyone. For instance, all individuals should have life insurance plans in their portfolios to ensure the future financial security of their families in case of any untoward incident. You should have sufficient life insurance coverage that can cover your family’s monthly costs and future goals like the higher education of children. Also, repayment of debts (if any), even when you are not around. Life is truly uncertain, and it is high time that you should purchase adequate insurance if you haven’t already. 

There are also some specific terms in the insurance lexicon that you should know more about. One such term is proposer. So who or what is a proposer? That is what the article aims at finding out. 

What Does a Proposer Mean in the Insurance Sector? 

Life insurance plans are made on the basis of contracts signed between the insurance company and the policyholder. The latter agrees to pay a specific premium to the former in exchange for protection/financial coverage against the specified loss, which is the death of the policyholder in this case. The person paying the amount is called the insured, while the one receiving the premium and providing the life coverage is the insurer. Sounds simple enough? Where does the proposer fit into all of this? 

The proposer is the person applying for life insurance coverage. They are the ones signing the insurance policy document. They are responsible for paying the premiums for chosen life insurance plans like term insurance, endowments, child plans, ULIPs, whole life insurance, and more. The proposers may propose insurance for themselves or other individuals in whose lives they have insurable interests. 

Here are some other points that you should know about proposers: 

  • Proposers initiate insurance contracts through the submission of written applications to insurance companies
  • Proposers must disclose all necessary information about the risks of being insured to the insurer, which will work out whether to reject or accept these risks. If they are accepted, then the policy will be issued to the proposer likewise. 
  • Any business/commercial entity and individual with any insurable interest in another individual may propose coverage of the risk by an insurer. Insurable interest means the financial losses resulting from the untimely and unfortunate demise of the person insured. For instance, if a household has an earning daughter, with her parents dependent upon her income, they will naturally have an insurable interest in the life of the daughter. Companies will have insurable interests in the lives of their employees/workers. 
  • The proposer is mostly the same individual as the insured, although they may also be different individuals. Proposers have to sign the proposal form and make the premium payments. The insured is the individual covered by the policy. Suppose a husband buys a policy for his wife. In this case, he is the proposer, while the wife is insured.

What lies behind the proposer’s importance? 

The proposer is vital in the insurance industry since the insurer will use the information they provide to determine whether coverage can be provided. Therefore, the proposer should furnish accurate and transparent details about themselves/others in which they have insurable interests, along with all possible risk factors. 

The proposer’s crucial function is to complete the insurance application. And submit the same to the insurer, along with making the premium payment. The insurer will examine the information given by the proposer to evaluate the risk of insuring the business/individual in question. The proposer will have to pay the resultant premium amount in case the insurer chooses to offer insurance coverage. 

Some Common Queries About Proposers

Can you change the proposer’s name? 

The proposer is the policy owner, and if the insured individual and proposer are not the same individual, then the transfer of ownership is only possible upon the latter’s demise. The proposer should mention a new policy owner in their will prior to their demise. The proposer’s name in the insurance policy may be changed by reaching out to the insurer with a request for the same. The company will need specific documents to handle this request, including a fresh application with updated details. 

What if the life insurance proposer passes away? 

This is another question that many people have. Suppose the proposer in any policy passes away before it is issued. In that case, the insurance company will not issue the same, and the premium will be refunded to the proposer’s beneficiaries. If the proposer is insured, the beneficiaries will receive the fixed sum assured upon their demise within the policy period. If the proposer and person insured are not the same, then the nominee mentioned in the will of the proposer will become the new holder of the policy. 

Are tax benefits available for proposers? 

Since they are the ones paying premiums to keep the policy active. They can claim tax deductions on premium payments up to Rs. 1.5 lakh under Section 80C. 
These pointers will give you a clear idea of proposers in insurance and the importance of the term. Staying updated with key insurance terminologies will help you better understand policy documents while enhancing your decision-making.

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