We all have that uncle who tries to sell an insurance policy whenever they meet us.
They carry many tricks in their pocket.
And somehow, whatever they tell us sounds convincing.
How can you save yourself from such trickery?
A 🧵on 5 tricks that agents use to lure you.
They carry many tricks in their pocket.
And somehow, whatever they tell us sounds convincing.
How can you save yourself from such trickery?
A 🧵on 5 tricks that agents use to lure you.
1. “I will refund the first premium.”
This’s a common trick.
Agents promise to return the first premium to the buyer, and they fall for the small discount.
Result - Buyers lose much more by opting for a policy that neither gives adequate life cover nor good returns.
This’s a common trick.
Agents promise to return the first premium to the buyer, and they fall for the small discount.
Result - Buyers lose much more by opting for a policy that neither gives adequate life cover nor good returns.
Why do agents do it?
Agents receive a sizable commission for selling specific policies.
So, they pass a small part back to the customer from their account.
They are okay with it because they earn yearly commissions if the customer keeps paying premiums.
Agents receive a sizable commission for selling specific policies.
So, they pass a small part back to the customer from their account.
They are okay with it because they earn yearly commissions if the customer keeps paying premiums.
2. “Why waste money on a term plan? You get nothing back.”
This is how Term Insurance With Return of Premium (TROP) Plans are sold.
Agents ask you to take TROP plans, where your premiums are paid back if you survive the policy term.
But people don’t realise its actual cost.
This is how Term Insurance With Return of Premium (TROP) Plans are sold.
Agents ask you to take TROP plans, where your premiums are paid back if you survive the policy term.
But people don’t realise its actual cost.
Premiums of TROP plans are much higher than term insurance plans.
Sometimes, it’s twice or thrice the premium of a regular term plan.
So, you end up paying more.
If you invest the additional amount smartly, you can make more returns.
Sometimes, it’s twice or thrice the premium of a regular term plan.
So, you end up paying more.
If you invest the additional amount smartly, you can make more returns.
3. “Hurry up. The premium will change soon.”
Agents often tell you that premiums will rise soon. So, you should hurry up.
This may be true, as insurance companies increase premiums periodically.
But don’t take the agent’s word for it. Often it’s just a selling technique.
Agents often tell you that premiums will rise soon. So, you should hurry up.
This may be true, as insurance companies increase premiums periodically.
But don’t take the agent’s word for it. Often it’s just a selling technique.
4. “Buy multiple policies for better financial management.”
Say you need a policy for a premium of Rs 50,000.
But agents tell you that buying 5 policies (with a premium of Rs 10,000 each) is more beneficial.
Why? Because you can skip a few policies in case of a cash crunch.
Say you need a policy for a premium of Rs 50,000.
But agents tell you that buying 5 policies (with a premium of Rs 10,000 each) is more beneficial.
Why? Because you can skip a few policies in case of a cash crunch.
How do you lose out?
Splitting policies becomes expensive because you miss out on a discount offered on a larger sum assured.
Besides, the total premium paid on multiple policies will be higher than that of a single plan.
The agent suggests splitting to meet his target.
Splitting policies becomes expensive because you miss out on a discount offered on a larger sum assured.
Besides, the total premium paid on multiple policies will be higher than that of a single plan.
The agent suggests splitting to meet his target.
5. “It’s a limited premium-paying policy. You can stop after 5 yrs.”
It’s typically a sales pitch to sell Unit linked insurance plans (ULIPs).
ULIPs have a lock-in period of 5 years.
So, you can liquidate your investments after 5 years.
But agents don’t tell you that.
It’s typically a sales pitch to sell Unit linked insurance plans (ULIPs).
ULIPs have a lock-in period of 5 years.
So, you can liquidate your investments after 5 years.
But agents don’t tell you that.
What’s the result of such mis-selling?
Investors don’t understand what they are getting into.
Some ULIPs are decent tax-saving products that combine insurance and investment.
But to make the best out of ULIPs, you must invest for the long term.
Investors don’t understand what they are getting into.
Some ULIPs are decent tax-saving products that combine insurance and investment.
But to make the best out of ULIPs, you must invest for the long term.
Contrary to the agents’ pitch, you will benefit more if you continue after 5 yrs.
Reason - Agent’s commission is front-loaded in ULIPs and becomes negligible after 5 years.
So, a higher amount of your premium gets invested.
But by that time, they try to sell you a new policy.
Reason - Agent’s commission is front-loaded in ULIPs and becomes negligible after 5 years.
So, a higher amount of your premium gets invested.
But by that time, they try to sell you a new policy.
How to avoid mis-selling?
The primary cause of mis-selling is that customers don’t read the policies themselves.
Customers tend to believe the information communicated by the agents.
And agents often advise with a vested interest, such as earning commissions, bonuses, etc.
The primary cause of mis-selling is that customers don’t read the policies themselves.
Customers tend to believe the information communicated by the agents.
And agents often advise with a vested interest, such as earning commissions, bonuses, etc.
So the next time you or any of your close ones buy a policy, remember the following:
• Keep your life goals in mind
• Don’t chase returns in insurance
• Read the policy documents, especially the terms and conditions
• Keep your life goals in mind
• Don’t chase returns in insurance
• Read the policy documents, especially the terms and conditions
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