12 Questions you should Ask Before buying an Insurance policy
Buying a life insurance policy without asking the below questions to your insurance agent/advisor is equal to buying gold with your eyes closed. It is your right to ask all these questions before you buy a policy.
- Are you trained or licensed to sell life insurance? What is your licence/employee number?It is your money and you are about to buy a product with long term commitment. It is very wise to buy such kind of products from the experts or professionals. And while buying you should be asking for the identity of the person selling the insurance to you. You can even ask about his qualifications and training he/she has got in the insurance industry.
Why should I buy this life insurance policy? Are there any alternatives?Your advisor/ Agent should be able to do a complete Financial Need analysis to understand your needs and investment requirements. You have to ask him about the various other alternatives available for him to choose for the particular need. Don’t let him to compel you for buying one product.
How much life insurance coverage will I need?
The amount of insurance you need can be easily calculated by the Human Life Value calculation. Ask this question from your advisor to find out the apt insurance cover you need.
How much is my life insurance cover in the plan suggested?
To comply with the IRDA rules and to get Tax benefits under Section 80C, Most of the insurance products offer a cover 10 times the annual premium you pay; however, you may still require more cover. Discuss with your advisor about the life Insurance cover provided.
Can you show me the benefit illustration?
A benefit illustration should be system generated with all the important details about the plan. It should have the premium, age, maturity benefit, Survival Benefit, Death Benefit, Lapsation and paid up conditions. Ask your advisor to explain the benefits of the plan with a company-provided benefit illustration.Do not accept or believe in the excel sheets prepared by the sales people.
Are the benefits guaranteed or non-guaranteed?
Most of the Traditional plans will be guaranteed and the ULIP plans doesn’t give any guaranteed returns. There may be false promises by the sales person/Advisor. Don’t believe in unrealistic returns. Check the product features in the company-provided brochure or company website, for guaranteed returns. You can use our review center for further product details.
What are the factors on which the bonus depends?
The amount of bonus declared on the policy is dependent on many factors like policy term and age. Some of the plans declare bonus on sum assured and some companies declare on premium paid. Confirm the way in which your plan works.
What are the Investment risks in this product?
Identity whether your policy is a share-market based or a traditional one. Normally the ULIP(Unit linked insurance Plans) are share-market based only. Evaluate if the product you have selected has any investment risk. If yes, ask your advisor about the nature and type of risk before making a decision. You should be knowing in which fund your money is invested and what type risk that the fund has.
What are the exclusions in the plan?
Understand the policy exclusions in detail. Ask all your doubts on policy rejection and exclusions on the plan chosen.
What is the charges in this plan?Not all your money will be invested in your ULIP plans. some part of the money is deducted as charges. You have to ask about the various charges about the plans. Your investment may be less comparatively to your premium paid.Check the allocation and other charges from the company-provided brochure or websiteHow long will I have to pay the premium?
Many of us are not aware of this main point. The agent or the sales person may commit that the policy is a single term investment or Limited period investment. Nowadays the insurance companies arrange policy call verification at the initial stage of the policy login. You can confirm the premium paying term from the Customer care or in the policy document or in the Product Brochures or in the benefit illustration.
What is the lock-in period?
Most of the ULIP plans post 2010 are having a lock in period of 5 years. And the Traditional polices have 2 years lock in period. You will be unable to withdraw money or may get a negligible value on your plan for a certain period of time. Ask your advisor on the duration for which you will not be able to access your investment.