Five mistakes to avoid with regards to your life insurance policy

When we buy a product or hire a service, we are looking at fulfilling a need, want or a desire.

When we buy a product or hire a service, we are looking at fulfilling a need, want or a desire. To put it in other words, through the benefits of a product or a service, we want a certain job to be done.  For instance — when we buy a car, the job we want done is for us and our families to commute safely.  Similarly, when you buy a life insurance policy, you want to secure financial future for your family or your own post retirement life. The job we want the insurance policy to perform is to secure our financial goals and provide financial security to the family.

Purchasing a life insurance policy can be time consuming with the decision often spanning weeks and even months for some people. The need to make the right decision for your and your family’s future warrants careful examination of the benefits you want from your life insurance plan. Not thinking through at the beginning, making hasty decisions and giving up on your policy early can have untoward repercussions.

Here are the five  mistakes that smart customers should avoid with regards to their life insurance policies:
Buying a policy without explaining your needs
Life Insurance is almost always sold and seldom bought. Therefore, when someone is selling you the plan, you ought to make sure that you are clear about reasons for buying it. If you need help with establishing that, ask your advisor or sales person to perform a needs analysis exercise. If your advisor or sales person is unable to conduct a satisfactory needs assessment, then your decision may end up benefiting only the sales person and not you.

Signing the contract without going through the details

Life Insurance contract form is the most important paper you sign however, most people delegate the task of form filling to the distributor or sales person. Be informed that if you are one of them, you may be committing a big mistake! Life insurance contracts are based on good faith which means that the insurance company considers facts shared in the contract form true in all respects. Your health, occupational, family history and lifestyle information are critical for the insurance company and failure to provide accurate details may lead to your claim being rejected.

Not verifying policy details

Once you receive your Life Insurance policy, spend some time going through the documents. While the policy bond may seem like a long and wieldy document, most insurance companies share the important details pertaining to the product in a simple and convenient format. Once you have gone through the details and find the product benefit information to be different than what was provided to you, feel encouraged to return the policy to the insurance company in question for correction or seeking refund.  Note that you usually have a window of 15 days to return the policy after it reaches you.

Not sharing the policy with your family

Remember that the policy is bought for the benefit of your family therefore not discussing the details of the policy, claim process etc. with your family or the nominee(s) can put them at great discomfort in time of need. Good news here is that you now have the option to ask for digitised policy document using the E-Insurance Account facility (it works just like Dematerialised shares) provided by your insurer.

Not keeping your commitment to the contract

One of the most common mistakes people make is that they don’t continue paying premium till the contracted term. Discontinuing or surrendering or lapsing your policy mid-way can be a very significant mistake if you have not thought it through adequately. Remember if you bought the plan after proper needs assessment, you must go back to it and validate the relevance of your goals. Some people relinquish the contract to pay for short term liability that they encountered.

Here, one must check if the Insurer provides loan facility on the policy. If that works, then take the loan and continue your policy.  It is imperative to note that if your insurance needs grow and change with time, rather than discontinuing your policy, you must constantly assess your financial goals and ensure that the job you wanted done, gets done.  

Purchase regrets?
One has a window of 15 days to return a life insurance policy after  it reaches him/her, hence feel encouraged to return the policy to the insurance company for correction or for refund.

(Author is chief marketing officer & EVP, Strategy & Retail Assurance, Future Generali India Life Insurance)

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