How to buy a plan

Any advertisement on insurance products is invariably accompanied by the disclaimer, ‘Insurance is a subject matter of solicitation’. It is an important rider, but one that is often ignored by the consumer. What it means is that insurance is to be solicited (asked for), not sold.

While it lays the responsibility for selecting a policy on the consumer rather than the company, it also encourages the customer to ask for a product that suits his specific requirements, instead of being saddled with a blanket plan. This implies he should consult an adviser, who can suggest the right product.

So the first step is to understand one’s insurance needs. This is where the interaction with an insurance sales agent helps. The agent will evaluate your needs, help you plan for them and then suggest a product that suits you. He will also explain the policy’s benefits and how it works.

However, most consumers, especially women, are not aware about either their needs or the various options available to them. The advisory role of the agent is often bypassed and they are reduced to mere sellers looking to close a deal, rather than professionals who should be offering advice.

There are various purchase points for life insurance (see Who Sells What) and you can opt for any of them depending on your requirement and comfort. As a buyer, make sure you understand the policy that you are considering and are comfortable with the company, agent and product. Even after you have taken an insurance plan, you can avail of a 15-day window to check how it works. If you are not satisfied, you can reject the policy.

These days, policies come as bundled products. For instance, a health insurance plan is added to a credit card, a life cover to a home loan or a mutual fund scheme. Women should make sure they understand the combined benefit of these products and what they stand to lose if they were to terminate the services provided by them.

Another important thing to consider is the insurance policy form, which is often extensive. This must be filled in correctly without deliberately hiding any detail. There have been instances when an insurance firm has declined a claim citing a mistake made in the form at the time of taking the policy.

So it is important to buy life insurance through the right source and to make sure that the seller clears your doubts at the time of taking the policy. Hence, perhaps, the ubiquitous caveat emptor, ‘buyers beware’.

Who sells what Here’s a look at the various types of insurance sellers:

Direct agents • They are the first point of contact with a company. • They represent the company and sell what it has to offer. • They are not equipped to compare policy plans across insurers. • Go to them for an evaluation of your insurance needs. Corporate agents • They sell in bulk, so you can buy a group plan from them. • They can offer a marginally better premium rate than the direct agent. Banks • Banks offer low-value insurance, which mostly includes co-branded products. • A good value proposition as an add-on to existing policy. Brokers • They act on your behalf after analysing your needs. • They can get you the best policy at the best price across insurers. • They work on commission but offer good advice. • They offer the best value proposition.