3 Common Mistakes when Taking an Insurance Policy
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Our financial decision has always been influenced by sales agents, sales representatives or any financial advisors one way or another. There is no doubt that insurance policies have been parts of puzzles in our financial planning. But before we make a general conclusion of how good your insurance policies or the insurance companies or the insurance agents, learn these 3 common mistakes of a policy holder prior to taking an insurance policy.
1.Choosing a policy in a one-perspective planning. Most of the times, when we are being sold an insurance policy, we look at the benefits of that particular policy and if you are rational enough to decide without being influenced/pushed by the sales
agent; you might take up that policy. Most people will consider what they are going to get out of the policy, namely the living benefits and very much concern on how much the return they are getting after X numbers of years. This sounds too common and most of the time makes perfect sense. However, take a step back and consider how this 1 policy is going to affect your full insurance programming once you have signed on the dotted-line. Among areas that you should look into including the overall cover ratios, financial leakages over life insurance coverage; critical illnesses over months of expenses and finally whether these funds are properly channeled to your beneficiaries.
2.Using insurance policies to secure future retirement. Without any doubt, insurance policies whether traditional or investment-linked policies will accumulate funds after many years of payment. But do consider this, most policies will NOTgenerate return of more than 5%. Those that claims to generate 8% or more is definitely non-guaranteed because it is being invested via unit-trust. If the purpose is solely for investment, then consider using Mutual Fund/Unit-trust because there is no such thing as free insurance (as some agents would use this to con and sell the policy) and the management and commission is way too high to cover back, compare to Unit Trust fee. However, should the policyholder wanted to invest but at the same time wanted to
ensure that if he/she dies prior to his goal of investment, his family should get a lump sum, then it should makes more sense to take up an insurance policy.
3.Assuming an agent is reliable based on the plan that he is selling. Agents are trained to sell and some irresponsible ones will use gimmicks,discounts, or even mis-selling to close the deal. For best advice, always look for agents who are willing to stand by your side, analyze your case as if his own case, learn your priority, study your expenses and financial situation prior to suggesting a plan. You will know it when your prospective agents have done a proper interview during the first appointment, and whether he/she is just wanting to close a case.
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