Life Insurance Buying Guide: Ten point check list to buy life insurance
Planning about taking an insurance? You need to check some basic things while taking a life insurance from your agent. Have this life insurance checklist ready to avoid future troubles and fraudulent policies.
Want to take a life insurance? That's good! Few people still cannot figure out why on earth they should take a life insurance; if you do, you are among the educated ones. Now, as you go for making the life insurance deal, with your agent, you must make sure few things. In India, financial literacy is still very low, and we often buy things being propagated. That is to say, we do not possess a professional attitude while purchasing financial products. We quarrel over a few pennies in the vegetable market, but carelessly invest lots of moneys in wrong places.
Probably, things are changing these days. Before investing in mutual funds, most people are now educated and careful enough to minutely check the offer document. Same awareness should also be there when you buy your life insurance. So, what are the things you need to make sure when approaching a life insurance agent? 10 things to check with your life insurance agent before buying a policy
Here is a great list of ten essential things to check before life insurance investments. Paying attention to these and adhering to these can save a lot of hazards and rigorous paper works in future. Let's find out what they are.
Authenticity of agent: Does your life insurance agent possess a valid license? If you do not know the person well beforehand, do ask for producing proper identifications as evidence of authentication for himself or herself as well as the business house.
Transparency about information: Is your agent hushing up something deliberately? He should not. Informational transparency is very important when you want to buy a life insurance. The requirements of every individual is different and that is why there are so many products to cater to custom needs. If you clearly understand that you do not fit for the particular product your agent is pushing for, it is time to say good bye. Do not let your agent sell you the product he wants to sell. Instead, buy what you want to buy. I admit that the agent has every right to canvass a certain product for better commissions, but you too must ensure the best use of your money.
Transparency about money: Almost same as above. Let your agent be transparent about the exact premium amounts. Understand the hidden charges. Demand an explanation wherever needed. It is your money and you can afford to be shameless about that, asking for a clarification.
Tailor made advices: Every individual is different. His or her needs and abilities vary, and accordingly their suitability to various financial products. Ask your agent to consider your income per annum, lifestyle and standard of living, assets, liabilities and other such personal scenarios before making any decision.
Insurance is for risk cover: A life insurance is meant for risk cover and is not an investment instrument. Yes, there are ULIPs and other things but I would always go for a term plan which is the simplest form of insurance. People mostly do not calculate and figure out that the money back or endowment policies help the insurance houses more rather than themselves. Insurance houses are here to do business. They will always try to promote endowment or money back plans because that gives them more profit. Will you help them having thicker wallets, or go for a term cover? If your insurance agent is saying that a certain product is good for investment, teach him that insurance is for risk cover and you would like to invest in mutual funds or stocks when investment would be required. I repeat, term insurance plans are better than money back policies.
Tax benefits: Ask the agent clearly about the various tax benefits that you may get from your insurance policy.
Risk profiles: Analyze your risk profiles, and figure out how much sum assured you actually need, and for how long. I have seen people taking life insurance up to the age of 70, which, I think, is a complete waste. You won't earn any money at the age of 68 for example, and the loss of your life won't cause your family any financial loss. Calculate how much sum assured is required and for how long and accordingly buy your insurance plan.
Be truthful: In most cases, once the agent succeeds to convince you about buying a policy, he wants to pack up things quickly so that he can visit the next client. Take your time! A common (but illegal) tendency among agents is to fill the form on behalf of you. They will just ask you to sign the cheque and the form and the rest of the information will be furnished by themselves. How will your agent know about all of your personal details? Be prepared for some shocks when you get your policy document on hand. I was a victim myself: I found out I worked on a garment store while I never did anything like that in my whole life.
Insist on furnishing the details yourself, and be truthful to your declarations. Even if you are a smoker or a drinker, your agent will tell you to declare that you have never touched a cigarette or alcohol in your whole life. This makes issuing the insurance policy smoother, which is apparently good for you and of course for your agent. After all, once the policy is done and the agent gets his commission, he doesn't care about it any more.
What about you? False declarations are extremely unethical, illegal and risky. For example, if your policy document says you never touched alcohol, and the reason of your death is related to alcohol consumption, your family may not get any money. Yes, the insurance company is quite likely to forfeit the claim for furnishing false statements. At best, they may not pay the sum assured in full. Think about it. Today you are lazy enough not to spare a few minutes to fill the form yourself. Tomorrow, your family will have to spend days and even months to settle the claim, if anything is paid at all.
After Sales Services: It is the duty of the insurance agent to provide you with good after sales services. At least once in a year, your agent should visit you, re-assess the risks, assets and liabilities, and decide whether you should go for a rider or top up or not. It is also a duty of the agent to offer timely reminders for coming premiums, and reinstating lapsed policies if any.
Insurance should not be forced: Last but not the least, you will see in insurance brochures and websites that they have a statutory message: Insurance is the subject matter of solicitation. That means, your agent cannot enforce a policy on you. He may promote it, or advise you to buy it, but it is up to you. They cannot force you, or disturb you by sending a hundred messages or making a dozen phone calls. If anyone does so, lodge a legal complain.
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