You do not want to be fooled by your insurance agent and for that you should be clear on what life insurance is and how to go shopping for one.
To begin with a life insurance policy is a contract that you enter with an insurance company when you buy one. Here you pay premiums to buy life insurance policy and in turn the insurance company will offer you a lump sum amount in case you die. This is known as the death benefit. The sum assured amount is paid to your dependent or to a nominee.
The life insurance plan is selected based on what the policyholders needs are and the best life insurance plans with high returns. There are also many kinds of life insurance policies and each policy has its own characteristics. Note that the death benefit that is offered by all kinds of life insurance policies is totally tax free.
Types Of Life Insurance Policies
The life insurance policies are basically classified as the term life and traditional whole life insurance policies. The life insurance plans are:
- Term life insurance – This is the basic insurance policy and is a pure life cover policy. You benefit from no savings and this insurance plan has no profits attached to it. The plan is cheaper and offers pure risk cover. In case the policyholder dies within the term plan the nominees are given a fixed sum assured amount. In case the policyholder survives through the insurance plan then he gets no pay out.
- Endowment plan – This buy life insurance plan offers life coverage and also has a maturity benefit. The endowment plan will pay to the policyholder in both cases-whether the policyholder dies or survives through the complete term of the policy. However, the endowment plan needs one to pay higher premiums and the plan invests into debt and equity instruments through which it pays out the profits.
- Unit linked plan or ULIP- ULIP pays out the sum assured amount or the portfolio investment amount on the death of the policyholder or when the policy matures. ULIP however is linked directly to the equity market and thus its performance is totally dependent on how the market performs. The policyholder can choose to save in the debt or the money market. The ULIP and mutual funds are mostly the same but the difference lies in that the ULIP also provides insurance,
- Whole life policy – This life insurance policy plans cover the policyholder for his entire life. There is no validity of this policy and so the policyholder enjoys the benefits all through his life. Regular premium is paid by the policyholder until he dies and when that happens the sum assured amount is paid out to the policyholders family.
- Money back policy – This policy gives the policyholder periodic payments all through the term of the policy. The sum assured amount gets paid at frequent and regular intervals. In case the policyholder survives through the term of the policy then he gets the sum assured that is remaining. In case of the policyholder’s death the beneficiary will get the full amount of the sum assured
What Should You Know When You Buy Life Insurance Policy Through An Agent
The problem that most of us face is to decide who to buy the insurance policy from. Online buying of insurance policies gives you better rates but through a broker you get his expert knowledge.
To buy life insurance policy should not be left to someone. This is because anyone can easily fool you if you do not have proper knowledge. There are frauds and if you do not move carefully then you can be trapped.
The agents would represent only one life insurance Company and thus would not be able to give you the best rates.
- No one will tell you if the best life insurance company in India plan has any hidden clauses or any drawbacks. They just highlight the benefits and you never get to know about the shortcomings till you go to claim.
- The agent wants to sell you a plan that may not necessarily be the most suited for you. Their main motive is to sell you a plan that offers them the highest commission. The plan thus may not match your needs.
- The agents would mostly be repeating the benefits of the plan but the exclusion list is never talked about. It is your duty to read and understand what the policy excludes
Take care to fill up the form yourself and understand the details of the policy to buy life insurance policy. This will ensure that you fill the details correctly and that you are not in the dark. Dealing with a life insurance agent without any proper knowledge of the product that you are about to buy life insurance is a big risk.
What The Agent Will Never Tell You About Life Insurance In India
Your agent will never disclose the following to you.
- The life insurance agents do not enjoy a fixed salary and their only earning is the commission that they earn when they sell a policy to you. Like for example an agent will not earn much by selling a term plan to you but he earns a good deal of commission when you buy life insurance plan. So why should he even tell you about a term plan or which is the best buy life insurance policy?
This does not mean that the agent is not interested in what is suited for you. Look for someone who is ready to give you all the information and with complete transparency so that you make an informed choice.
- Agents earn more on new polices – The commission that the agent earns is higher in the first year of the policy. After that the commission that they earn for an existing policy is very minimal. There could be some agents who would be pestering to keep buying new polices and if that is the case then you definitely need a second opinion.
- Buy life insurance policy could build up on cash and a portion of the premium that you pay goes to a speared account. This grows slowly. You can also take a loan through your policy and this is promoted by many agents. However note that it takes tie to build this cash amount and you may not have sufficient cash to loan from in the first few years. It is also dependent on the way the investment is performing. Your agent may not tell you this.
If your agent tells you an estimate of the amount of best life insurance policy in India that you need then ask them to share the calculation with you. Make sure that the amount is realistic. It is very important that you do not leave the whole shopping of best life insurance policy in India to buy life insurance product to the agent because that may only get you fooled.