Insurance agents are often the first point of contact when you are buying life insurance. From briefing on policy features to helping you complete medical formalities and filling up forms, they are supposed to provide assistance in every possible way. But very often, you meet pushy insurance agents, who force you to buy policies, irrespective of whether it is actually meant for you. The agent of course earns a hefty commission on the deal, but you end up with a “junk policy”. Here are 10 things you must ask your insurance agent to ensure you buy a policy that is most suitable to you.
1) Is the agent licensed to sell insurance?
As per IRDA guidelines, every insurance agent must possess a valid license that authorizes him to sell insurance. So before you actually put down your personal information and financial details ask your insurance agent if he possesses a valid IRDA license.
2) Which is the most suitable plan?
Term plans, ULIPs, Whole Life, Pension and Endowment, which one of these is actually going to be most suitable for you? Ask your agent to clearly explain each and every one of them, so that you are able to make a sound decision. Many a times agents could get a bit pushy about ULIPs and endowments as the commissions earned on them are much higher than term plans. Evaluate the different choices on your own accord.
3) Explanation of all policy terms
Most of us aren’t really aware of the various jargons and terms relating to the policy. Ask your agent outright to explain what they convey. This is the first step to ensure you understand what you are entitled to from the policy.
4) What are the expenses on the policy?
Insurance policies come with various charges associated (apart from the premium you pay) such as administration charges, surrender charges and mortality charges. ULIPs additionally, have a more elaborate charge structure including premium allocation charges and fund management charges. Ask your agent to explain each and every charge associated.
5) Does the plan suit your risk appetite?
In case of ULIPs, ask your agent for the debt to equity ratio of your plan. Unit linked plans generally come with a couple of variants to suit different risk appetites of investors. Your agent should be able to gauge your risk profile and help you choose the right option.
6) What is the Sum Assured and Guaranteed Returns on the plan?
The sum assured is the guaranteed amount that is payable when a claim arises or when the policy matures. Along with this sum assured, the other maturity benefits include, guaranteed bonuses(assured amount, but given only after 5 years) and reversionary bonuses( not an assured amount and given on the basis of companies performance). Your agent should give you a realistic explanation of this along with details of guaranteed bonuses, if any. In the case of ULIPs, where returns are market-linked and not guaranteed, IRDA rules mandate an agent selling insurance products to provide illustrations assuming 6% and 10% returns.
7) What is the claim procedure?
What importantly you must ask, is the procedure and the exact time frame needed by the company to settle any claims. It is wise to include your family members in this discussion as they would be the ones who would actually be initiating the process, if such a situation rises.
8) Is there a discount on the yearly premium?
Companies offer up to 3% discount if the premium is paid yearly as opposed to monthly or half-yearly. So if you have the liquidity to pay your premiums as a lump sum amount, check to see if such discounts are available.
9) What is the free look period of the plan?
Insurance companies offer a free look period of around 15 to 30 days. If for any reason you aren’t really happy with the plan, you could return the same within this free look period. Your agent should provide you with this information.
10) What are the policy riders and exclusions?
Riders are optional add-ons to a plan at an extra cost. For example along with a life cover, you could opt for a critical illness rider or a personal accident rider etc…
Exclusions on a policy are certain conditions under which the policy claim will not be honored. Suicides within a year of policy and death due to criminal activity are generally excluded. Ask your agent to brief you on both.
written by Ramya Ramachandran