The chart below outlines the four stages in the insurance/assurance application process.
1 | 2 | 3 | 4 |
Decide what cover you require by obtaining advise from an insurance agent/broker*. | Complete the proposal form truthfully. | Have your proposal for insurance accepted. Pay your premium as calculated by the actuary. | Obtain a policy or insurance certificate setting out what risks are covered and for how long. |
*An insurance agent sells insurance on behalf of the company that he/she works for. He/She will receive a commission for each policy sold. An insurance broker works for himself/herself. He/She can shop around on behalf of the client to get the best, and/or cheapest, policy for the client from any insurance company. The broker will receive a commission from the company that he/she finally does business with.
The Proposal Form
A proposal form is an application form for insurance or assurance.
The proposal form must be completed truthfully and accurately, as the principle of utmost good faith applies.
The utmost good faith principle states that the person taking out insurance or assurance must answer all questions truthfully and provide all relevant information to the insurance company. For example, when applying for motor insurance, you must give details of any previous accidents you were involved in. Also, when taking out life assurance, you must give details of any illnesses you suffer from.
You must tell the truth, the whole truth and nothing but the truth because...if any lies are told or important information is not provided, whether accidentally or deliberately, the insurance company will not pay any compensation because the principle of utmost good faith will have been broken.
What questions will the proposal form ask?
The proposal form will ask for the person's name and address, and the type of insurance required. The other questions asked on proposal forms vary with the depending on the type of insurance involved, as shown in the box below.
CAR INSURANCE | LIFE ASSURANCE | HOUSE CONTENTS |
· Age of driver · Occupation · Type of licence · Details of car | · Age of person · Occupation · Hobbies · Medical condition Drinker or smoker | · Value of contents · Alarm systems |
Check out the Activities page to see an example of a completed proposal form and to practice filling out sample proposal forms. Also, check out the Principles of Insurance movie on the Videos page for more examples featuring the principle of Utmost Good Faith!
