Failure to understand insurance terms may leave customers bearing the loss

Raj Kiron Das: Insurance, once viewed as a simple legal formality, has evolved into a cornerstone of modern financial security. It promises protection against the unpredictable- from sudden illness and accident to natural disaster and property loss. Yet in Bangladesh, the reality tells a different story. Despite its growing relevance, insurance remains widely misunderstood and often undervalued. For many, it is an obligation rather than a strategic safeguard and this misconception frequently leads to distressing outcomes when claims are made.

The misunderstanding begins with perception. Too many policyholders still see insurance as an unnecessary expense- something they pay for but hope never to use. This mindset prevents individuals from recognising insurance as a vital component of financial planning. Instead of carefully evaluating which risks to cover, many people purchase policies based on casual advice or persuasive sales pitches, without fully comprehending what is actually being promised. When a crisis eventually arrives, they often discover that the protection they counted on does not apply to their situation. The supposed shield of safety turns out to be full of gaps.

The root of this problem lies in the lack of clarity and communication between insurance companies and customers. Policy documents are usually written in complex legal and technical language that few can easily understand. Exclusions, conditions and limitations are buried deep inside pages of small print, leaving customers unaware of the restrictions that define their coverage. When claims are denied on technical grounds, policyholders feel betrayed, even though the company may simply be enforcing the terms that were always there- but never properly explained.

This failure, however, is not only the responsibility of consumers. Insurance companies and agents bear a significant share of the blame. Their duty is not only to sell policies but to ensure clients clearly understand what they are buying. Simplified explanation, transparent communication and honest advice should be the basis of every transaction. Unfortunately, the focus too often falls on meeting sales targets rather than building long-term trust. As a result, the relationship between insurers and the public is weakened by suspicion and disappointment.

Restoring that trust demands both awareness and answerability. Insurance should be presented not as a burden but as a necessary tool for stability. Just as saving and investing are considered act of prudence, ensuring one’s health, life, or property should be viewed as an act of foresight. Awareness campaigns must highlight how insurance functions as a partnership between the individual and the institution- a promise that only works when both sides understand and fulfill their roles.

At the same time, insurers must transform their approach to customer service. Transparency should not end when the policy is sold; it should guide every stage of the relationship, especially during claim. Timely settlement, clear explanation and empathy in dealing with clients may go a long way toward rebuilding confidence in the system. Regulators, too, have a role to play by ensuring that insurance products are fair, comprehensible and marketed responsibly.

Ultimately, the challenge is cultural as much as procedural. For too long, insurance has been treated as a mandatory checkbox rather than a meaningful part of responsible financial behavior. This must change. Understanding insurance terms are not a trivial task—it is the very foundation of financial protection. When individuals become informed, and institutions become transparent, insurance can truly serve its intended purpose: turning uncertainty into preparedness, and anxiety into assurance.

Only then will insurance in Bangladesh cease to be a misunderstood promise and instead become what it was always meant to be — a symbol of confidence, stability, and security in an uncertain world.