Insurance is a legal contract in which two parties (Insurer and Insured) come into a mutual consensus. Like other contracts, there is no scope of verbal commitments; therefore, while signing such a contract, one ought to be aware of each and every aspect of it such as exclusions, deductibles, surrender value, cash value, and the like. Today, I’ll list some important questions that you should ask your insurance agent. Before buying life insurance, you should seek answers of these questions from your agent. If he/she fails to answer then simply say ‘No’.
Generally, it’s your insurance mediator or agent’s duty to tell you everything in colloquial manner. Although, every insurance agent follows insurance selling protocol, but in some or rare cases, we see policy misselling cases.
So, here I’ve come up with some basic but very crucial questions that you should ask your insurance agent to make sure you’re buying a worthy policy which will help your family in rigorous times or in other words, will serve its purpose. And an insurance policy only serves its purpose if it’s chosen wisely.
Life insurance is a long-term investment. Therefore, one should research thoroughly to pick a best and appropriate policy. Insurance policies are subject to certain terms and conditions such as policy term, exclusions, coverage etc. Therefore, before buying an insurance product, one should aware of insurance policy wordings. Policy wording is not a layman’s cup of tea.
So, here life insurance agent plays an important role, his duties are suggesting right life insurance to prospect, and helping him/her understand associated terms and conditions.
One question for you, how would you know your agent is educated enough to suggest a right policy?
Here on this blog, I often say:
It’s better not to buy a policy than buying a policy without knowing the terms and conditions.
Just imagine, you’re buying life insurance from a person who doesn’t know anything about insurance. Would he be able to suggest you a policy as per your needs? An uneducated agent falls in the same case.
Just like before buying a physical product such as home, electronics, or the like, you check each and everything yourself, you’re supposed to do the same while buying life insurance. Don’t just blindly believe on agent’s verbal commitments. Ask him to provide, policy brochure. Read all terms and conditions, seek agent’s help to understand policy wording.
Apart from that, before buying life insurance, ask questions mentioned below to your life insurance agent to make sure you’re going to buy a policy that fulfills your insurance needs; without putting extra burden on your pocket.
Before buying life insurance, ask 9 questions to your agent
Following questions will help you know how good your insurance agent is and of course will help you choose a right policy.
Ask the insurance agent to show his insurance agent license
Did you find this question difficult to ask?
I must admit ‘Yes’ it’s; especially if you’re too emotional. But, wait, for your agent it’s normal. It’s his duty to prove his authority; if he is asked for.
You might be pondering what is the hack in this question?
Actually, this way you can know your agent is indeed a licensed agent of concerned insurer.
When buying life insurance, first thing you should do is ask agent to show his insurance agent license. I know you would hesitate to ask such a question; especially if agent is from your friends or relatives. But believe me it is the first and important step that we cannot avoid.
If your insurance agent has a registration card provided by the company, it means that your agent is educated enough (theoretically) to understand your insurance needs.
How? Because no company can issue an insurance license to an agent unless he completes pre-licensing education and pass a licensing exam; conducted by insurance regulatory authority of your country for example Insurance Regulatory and Development Authority of India (IRDAI), National Association of Insurance Commissioners (NAIC) and the like.
In this examination, insurance agents are trained to identify the needs of the prospect and suggest insurance policy accordingly. If your insurance agent does not have a valid license, it means that your agent is not eligible to suggest you a life insurance; according to your needs.
Do I need a life insurance policy?
Life insurance policies are designed to provide financial help when insured demises. Therefore, before purchasing a life insurance policy, ask yourself and your insurance agent, “Do I need a life insurance cover?”
For your help, if you’ve dependents who cannot survive without you for instance parents, spouse, and children, then you certainly need a life insurance cover.
On the flip side, if you’re a young and no one depends upon you and your parents have a regular source of income like pension, then buying an insurance policy would not be a good decision for you, in early age only.
In that case, you should seek other investment options such as SIP, stock market, gold bonds and the like to meet your future goals.
If you are planning to start a family then you can buy a life insurance policy. Also, if you’re entering into your 30’s then you should have a life insurance cover.
What are the different types of life insurance policies?
This question can help you understand difference between term and whole life insurance. Let me give you a quick glance. Term life insurance, also called pure life insurance, is designed to provide only death benefits; which means, no benefits will be paid if policy holder survives the policy term.
On the contrary, whole life insurance policies are tailored to give survival benefits along with death benefits. It is remarkable that term life insurance policies are significantly cheaper than whole life insurance policies.
For most of us, term plans are sufficient.
Why is this insurance policy good for me?
There are many plans in life insurance and an insurance agent suggests a policy according to the needs of every customer. When your insurance agent suggests you a policy, ask him, “There are many plans in life insurance, why have you chosen this plan for me out of those plans and why is it right for me?”
How long has the company been in insurance business?
This is a very basic and skippable question, only if you already know the company exists. But, it could give you an idea that you’re dealing with a genuine company. The watchdog authorities, who regulate and monitor insurance marketplace in your province, continuously track activities of all insurers to curb insurance misselling and frauds.
These authorities can deprive insurers from providing insurance services if they (Insurers) are not complying with insurance selling guidelines. Therefore, it might be possible that company who has insurer license today wouldn’t have tomorrow.
Before buying life insurance, check list of registered life insurance companies by visiting official website of regulatory authority.
How much life insurance cover do I need?
Generally, insurance agent suggests you amount of cover that you should take. It’s presumed that insurance agents give you exact idea about the coverage that you actually need. And there’s no doubt, but to my mind, you should also engage in this decision.
After all, it’s about you and your money.
Many experts from the insurance marketplace suggest to buy insurance cover between 10-20 times of your annual income, I too support this rule. Let’s understand it with an example;
If you have an annual income of $10000, then you should take an insurance cover between $100,000 to $200,000.
Remember, one can increase or decrease insurance cover depending on financial conditions and insurance needs.
What does my policy cover and doesn’t cover?
Before buying life insurance cover, we can’t afford to ignore this. If we do so then all our efforts will go in vain.
It’s a very important question to ask from your insurance agent. Don’t rush and stay clam while purchasing a life insurance cover. Ask your agent to explain events that your policy covers and different exclusions in your policy.
If your insurance agent evades by saying he is running late and he has to attend other clients then let him go but don’t buy life insurance without knowing what does exactly it cover. You can take policy brochure from him to read terms and conditions of your contract.
Note: Do not buy insurance without reading the policy brochure. If the agent makes an excuse that brochures are out of stock or not available in the moment, then tell him flatly, “I would like to read the policy before buying life insurance.”
Is the premium flexible?
Financial conditions change time-to-time. In this uncertain era, rich can become poor or vice versa in the blink of eye. Therefore, it’d be better for you if your policy allows you change your premium rates.
Basically, you pay a fixed premium throughout the policy tenure but some insurers allow customers to change premium rates; if they’re going through financial hardships. Although, it is not an important factor that a policy should have, but it adds an extra privilege to your policy.
What happens if I miss insurance payment?
Some unexpected expenses may hinder you pay your premiums at time. So in such situations, you should know that what will happen to your policy. And you should be aware of consequences. Ask your agent to tell you what you can do if such situations arise?
Usually, after expiration of the policy, be it life insurance, health insurance or other, you get 30 day grace period to reinstate your policy to avoid consequences such as policy lapse. After grace period, your policy lapses and to revive it you need to pay some penalties. It may also affect your coverage.
As per ‘Assignment Clause’, policy holder may also assign his policy to someone else.
Should I add riders to increase coverage?
Policyholders can add riders to their life insurance policies to get additional benefits and coverage. You can add riders to your policy to cover an event that your life insurance policy doesn’t cover alone.
Riders are inexpensive and give you more benefits than they cost. Ask your life insurance agent to know whether you need them.
Is there any discount if I buy life insurance today or later?
We can say death to ‘Not today’ but can’t insurance. It’s an immediate need.
Insurance is an immediate need of everyone; therefore, never add later to it. However, discount word knocks everyone’s mind. You can ask your agent if there is any discount if you buy it today.
Many agents offer discounts if customers show interest in buying but seek discounts.
You can get huge discount by buying insurance online. Insurance agent can also give you 10 to 20 percent discount on first year’s premium.
Remember, If you would not ask for discount, no one would give you discount.
Read this post for more information, “things to consider while buying a policy”.
By asking the above questions, anyone can buy a good life insurance. If you would ignore them, you’d end up buying a worthless policy.
Insurance is not an investment tool, it is an easy way to protect yourself and your family from unforeseen events. If you’ve dependents then must have a life insurance cover.