David wants to buy life insurance, so he contacts an agent to discuss available policy options. The agent arrives, buts seems more interested in plugging a policy than in informing him about other policy options and aspects of life insurance.
He says, “Trust me, This will take care of all your insurance needs.” So saying, he gathers his files and rushes off, probably to plug the same policy to another client.
The policy sounds like a good deal. But should David purchase it right away? The answer is no. Before deciding to buy the policy, David needs to ask the agent a few key questions, some of which are listed below.
Q1. Tell me about the insurance company.
Agents typically represent multiple insurance companies. So David must ensure that the plan he is selling is from a credible insurer. The agent must convince him about the insurer’s claim settlement ratio, number of years in business and overall financial stability.
Q2. What are my coverage needs?
The agent needs to carry out a thorough calculation of David’s insurance needs. Insurance calculators give buyers an idea of their coverage needs, but a qualified agent can gain a more comprehensive idea of the policy buyer’s financial circumstances, and thereby offer a more nuanced estimation.
Q3. What types of insurance policies can I buy?
In David’s case, the agent was eager to sell a single policy. He did not give him any options. This is wrong. The agent should bring to the table multiple policy alternatives, thereby enabling the customer to make an informed decision.
Q4. What is not covered?
Agents generally keep mum about exclusions in a policy, but David must ask about these coverage limitations. It is best to get these confusions cleared out at the buying stage in order to avoid future shocks.
Q5. Can I convert or renew my policy later?
Most policies allow renewals without the insured needing to prove his insurability once again. However, it is best to check with the agent. If David hopes to upgrade to a better policy in future, he should ask the agent about conversion rules and limitations.
Q6. What is the claim procedure?
The agent may promise to help the family with the eventual claim filing, but David must find out about the procedure and necessary paperwork anyway.
Q7. Will my premium payments increase with age?
Insurance premiums tend to rise as the years pile on, but David must check with the agent about possible increases following renewal or switching to a new policy.
Q8. Will the death benefit adjust for inflation?
As he buys a policy at the age of 32, David can only guess that the death benefit will cover his family’s future expenses. But there is no way to guess inflation rates three decades on. Thus, David must ask the agent whether the policy adjusts for inflation.
The above reflect only some of the information that the policy buyer must gather from the agent. My advice is to take your time when buying life insurance—do your research, ask questions, and finally, make an informed decision.
Amit is an Independent Financial Advisor, based in Dubai since 1997. He is part of the prestigious ‘Million Dollar Round Table’ (MDRT), which is an elite club of the best financial advisors worldwide.
He has authored the ‘6-Step Financial Success Guide’, and the book ‘Creating, Preserving, Distributing Wealth’.
He helps business owners and professionals ‘Create A Second Income’ through investments.
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