We often come across complaints and grievances regarding insurance mis-selling from our near or dear ones. So, how do we help solve this problem of insurance victimizations?
While dealing with one of our clients, who is in her 70’s, we came to know that the bank branch which previously used to manage her wealth has dubiously sold her insurance policy disguised as bank FD’S and this is not an isolated case there are innumerable other cases, which is much worse.
In the above case, the beneficiary was uninformed and deceived, but there are other cases where the insurance agents sell substandard products to earn a higher share of the commission.
The insurance business is dependent on commission, and there is no secret to it. While buying an insurance policy, you need to know whether the person sitting at the other side of the table has the best interest of you or them.
Now the question is, how to go about selecting an insurance policy?
- You need to identify your goals: Don’t go by the products but rather focus on the solution. Insurance products are designed to solve a problem, e.g., health insurance will help you cope up with the cost of rising medical expenditure. Therefore, depending on your age and health condition, you need to get a health cover for yourself or your family. A better approach would be to consult your financial advisor before getting one. Just because there’s a hot product in the market, which is selling like crazy, doesn’t suggest it would serve your purpose.
- Understand the product and take your time to decide: Compare different products and understand the intended benefits it provides. Would you randomly go to a mobile store and buy a phone? I guess not. At first, you will compare its features, consider your budget, and then buy it. Similarly, in the case of insurance, understanding, comparing, and taking time before making the decision is equally important. Also, the discount factors of policies should never influence your buying process. As insurance is a long-term commitment, it’s better to scrutinize everything and make rational decisions.
Do I really need it?
If I’m being honest with you, you only require two insurance coverage. The first is health, and the second is life. It’s better to avoid the rest of the floating policies in the market. I am pretty sure you have heard about the endowment plan and a bunch of ULIP plans, and what not? I can bet only a handful of people need these products; the rest of us would be better off avoiding them.
If these products are so shabby why are they being sold in the market?
The answer is very simple, they come up with an inherent feature of guarantee – ‘A guaranteed amount‘, and most people trade an optimal return for a guaranteed amount. Insurance is an expense and not an investment, so next time when you plan to get one, ask yourself if you really need one or not.
A Good Financial Adviser + Good Insurance Product + You = Life-long Commitment
Your primary concern as a policyholder is that the insurance you purchased fulfills its purpose.
Imagine a not-so-pleasant scenario: you or a loved one is experiencing a medical emergency, and you made an insurance claim that was either denied outrightly or was not covered. At that vital moment, it is only your advisor who will assist you in settling your claim. In case of your term insurance and get your family claim settled, ensuing hiccup-free experiences. Now you can notice that a lifetime commitment requires not only a product but also an advisor.
Till now we have covered the need for identifying goals, comparing and selecting a product, and also the importance of financial advisors, so we are left with one last important question, how to identify the right advisor?
A salesperson discusses the product he or she will be selling, which is an exciting new product that has recently entered the market as he is interested in the hefty commission and concluding sales as soon as possible.
On the contrary, an advisor would prioritize goals over the product, they will identify your need, and only if required they will ask you to get insurance. They will not be in a hurry to conclude sales and offer you enough time to take the final decision.
Most importantly, your financial advisor will be there for you every step of the way. Long-term relationships are more important to them than short-term profits.
Written by: Bappaditya Roy Chowdhury
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