Uncover the Secrets Insurance Agents Won't Share About Your Policy

Greetings! Have you ever encountered a family member or friend who seems too eager to sell you an insurance policy? They might have seemed convincing with their 'small tricks,' but how can you protect yourself from falling for these deceptions?

Common Tricks to Watch Out For

Here are some of the common tricks that agents use to lure you into purchasing their policies. By being aware of these tactics, you can make more informed decisions and avoid costly mistakes.

1. "I Will Refund the First Premium"

This is a common trap. Agents often promise to return the first premium, which seems like a small discount. What happens is that you end up losing much more because the policy provides inadequate life cover and doesn't offer good returns. Agents do this because they receive a large commission for selling specific policies, and they pass a small part back to the customer. They are willing to do this because they earn yearly commissions if the customer continues to pay premiums.

2. "Why Waste Money on a Term Plan? You Get Nothing Back"

This is how TROP (Term Insurance With Return of Premium) plans are pitched. Agents encourage you to take TROP plans, where your premiums are returned if you survive the policy term. However, people often don't realize the true cost. The premiums for TROP plans are significantly higher than those of regular term insurance plans. Sometimes, they are even twice or thrice the cost of a regular term plan. You end up paying more than necessary, and if you invest the extra amount smartly, you could make more returns.

3. "Hurry Up. The Premium Will Change Soon."

Agents often create urgency by saying that premiums will increase soon. This may be true as insurance companies periodically adjust premiums. However, you shouldn't jump on their advice without verifying it. It's often just a sales tactic to prompt you into action.

4. "Buy Multiple Policies for Better Financial Management."

Say you need a policy for a premium of Rs 50000. But agents might suggest buying 5 policies with a premium of Rs 10000 each because you can skip a few policies in case of a cash crunch. While this might seem like a good idea, you could end up paying more in total premiums and miss out on discounts offered on a larger sum assured. Splitting policies can become expensive, and the total premium paid on multiple policies will often be higher than a single policy. Agents suggest this splitting to help meet their own targets.

5. "It's a Limited Premium-Paying Policy. You Can Stop After 5 Years."

This is typically the pitch to sell Unit Linked Insurance Plans (ULIPs). ULIPs have a lock-in period of 5 years, after which you can liquidate your investments. However, agents don't always disclose this fully. The result of such mis-selling is that investors don't understand what they're getting into. Some ULIPs are decent tax-saving products that combine insurance and investment. But to make the best out of ULIPs, you should invest for the long term. Contrary to what agents claim, continuing after 5 years will benefit you more. Reason being, agent's commissions are front-loaded in ULIPs and become negligible after 5 years, so a larger portion of your premium will go towards investment. But by that time, they try to sell you another policy.

How to Avoid Mis-selling

The primary cause of mis-selling is that customers don't read the policies themselves. They tend to believe the information communicated by agents, who often advise with a vested interest such as earning commissions or bonuses. To avoid falling into these tricks, here are a few tips:

Keep your life goals in mind when evaluating policies. Avoid chasing returns in insurance. Focus on coverage and long-term investment. Read the policy documents, especially the terms and conditions.

By following these tips, you can make more informed decisions and avoid costly mistakes. Remember, being well-informed and cautious is the key to making the right choice in insurance policies.

Conclusion

If you feel better informed about insurance policies, please consider UPVOTING and SHARING this article to help spread the word and reach more readers.

Follow Us for More Insights on Personal Finance

To learn more about personal finance, follow us on ET Money.