The Top 10 Common Mistakes that an Insurance Agent Often Commit

Introduction

Sujita lost her husband in a car accident and had been left helpless. She had a little boy to take care of. Her husband had life insurance but never found it necessary to tell his wife about it. Sujita had been struggling to make ends meets for months. She took up menial jobs, which made her extremely tired, and she was very lost. An office colleague of her husband goes to know about this situation. He knew all about her husband’s policies and investments. He helped them claim the policy and pull her out of her misery. After Sujita came to know about the insurance money, her life started coming back together, and she became more financially stable. 

What is Life Insurance? 

Life Insurance is a financial cover for a contingency linked with human life, like death, disability, accident, retirement. Human life is subject to risks of death and disability due to natural and accidental causes. When human life is lost, or a person is disabled permanently or temporarily, there is a loss of income to the household. 

COVID 19 has taken the life of many breadwinners of the family. It has had a lot of impact on their lives. Life insurance here covers them. They provide them with financial cover. It helps them to get back on their feet. It allows them to make ends meet. COVID 19 has created this awareness. A large majority is still not covered by insurance. Some find no use for it until a certain age. The worst scenario is when family members are not even aware of the existence of the policy. 

• Leaving it for Later

Young people don’t find the need to invest in insurance plans. It is common in the 30 to 35 age bracket. The pandemic has gotten rid of such notions. One should not remain unprotected for long. It makes the family vulnerable. Premiums are lower for younger people. It makes it easier for them to lock in the plans. For older people, it is much higher. The insurance companies have hiked their premium since the increase in claims have gone up. It is because of the sharp rise in deaths due to COVID. It is why it is better to lock in a plan early. Waiting for more will increase the premiums higher.

• You Are Not Buying a Term Plan.

People are getting more inclined towards term plans after the pandemic. Even then, traditional plans seem to be the way to go. One-third of the plan owners have no clue about term plans. A regular term plan pays a fixed sum if the insured person dies before the policy term. But if he survives, there is no maturity benefit. The insurance policies are usually more of an investment plan. It doesn’t seem right. Mixing insurance and savings is a bad idea.

• Hiding Critical Information

Many claimants are being deprived of their claims. It is because they do not divulge critical information at the right time. These can include medical history, risky lifestyle choices, and smoking. Hiding such information can lead to the claim being rejected. Insurers have grown more vigilant since the onset of the pandemic. Buyers should get themselves checked before obtaining a policy. After three years, however, claims can’t be rejected.

• Opting for An Extended Policy Term

Some plans extend up to 100 years and beyond. These plans aim to cover the whole life. These gimmicks should be avoided. The payout from the policy is assured as the likelihood of surviving this long is less. It can leave behind a substantial amount for the family members. It is advised against. The higher premiums for a long time will reduce the payout to an insignificant amount. It will happen due to inflation. Investing the difference in premium in an equity fund will yield better results.

• Buying a Short Policy Term

Opting for a short term should also be ruled out. It is because the policy only covers your family for 40 to 50 years. It will be relatively cheap but leave your family vulnerable. The policy should cover you for a substantial amount of time. You are arranging for kids’ education and accumulating enough savings for them. The breadwinner’s demise must not stop the families’ growth.  

• Opting for Return of Premium

This plan promises to pay back all the premiums if you survive the whole term. It is good, but it’s too good to be true. The catch is a far higher premium. If a Rs 1 crore term cover costs Rs 13,448 annually, the same policy with a return of premium option will cost Rs 28,590 per year. After considering all the calculations, this is what it boils down to. The return of the premium policy will pay back 7.43 lakh in the end. But with the difference in premium, it would fetch you 13.15 lakh by the age of 60. 

• We Are Not Reviewing the Life Cover.

Buying a life cover early might be good. This is an intelligent choice. As time evolves, finances are altered. Thus it might be better to review policies from time to time. Certain critical situations demand an approach with higher cover. The birth of children is one such example. A growing family needs more, and thus, reviewing it is essential. If income rises, then also opting for a more significant premium is apt.

• Choosing the Wrong Payout

A lot of different payouts are at the disposal of the policyholder. It is paying the entire sum, regular, staggered payout or even a combination. It might help your family if disaster strikes. Handling a lot of money together may be a difficult task. However, staggered money may lose its value under gradual payout. Inflation will surely do this. If any significant expenditure comes, then staggered payment will fail to fulfil that. Also, getting a lump sum and investing in a fixed deposit is the more common approach. 

• Opting for Limited Pay Mode

Limited pay mode enables you to pay only for a short duration of time. At the same time, regular payment asks you to pay for the whole period of the plan. Even a single premium option is available. The limited pay mode can also be adjusted to the years that you work. People with a short career span can view this as a fruitful option. Paying early can prevent policy lapsing owing to missed payments. Also, it frees you from the cash outflow burden early.

• Not Informing your Family

It is the worst of mistakes to make. Giving them a clue is always better. They will not have access to any benefits that you paid for. This topic might be uncomfortable but is very necessary. The exact whereabouts must be disclosed. During a disaster, your family shouldn’t have to run around seeking help. Every tiny detail is of utmost importance and must be told.

Conclusion

Also, after being insured, some people don’t know how to take advantage of the policy. Every little detail must be looked after carefully. All things must be carefully considered before buying a plan. Everything must be following your demands. Everything must be hidden from people you think might try to take advantage of if disaster strikes. You have the right to know every tiny detail related to the policy so that you can take an informed decision.