How to Buy Life Insurance and From Whom to Buy
- Insurance is a complex product representing a promise to compensate the insured or third party according to specified terms and conditions in the event of the occurrence of a covered contingency. In most insurance transactions there is usually an intermediary - an insurance agent (individual or corporate) or an insurance broker.
- Insurance intermediaries serve as a bridge between consumers (seeking to buy insurance policies) and insurance companies (seeking to sell those policies).
- Insurance brokers are licensed by the IRDA and governed by the Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, 2002. Individual insurance agents and corporate agents are also licensed by the IRDA and governed by the Insurance Regulatory and Development Authority (licensing of Individual Insurance Agents) Regulations, 2000 and the Insurance Regulatory and Development Authority (Licensing of Corporate Agents) Regulations, 2002, respectively. These Regulations lay down the Code of Conduct for the respective intermediaries.
- An intermediary has a distinct role to play in the entire life cycle of a product, from the point of sale through policy servicing, up to claim servicing. An intermediary shall provide all material information with respect to a proposed cover to enable the prospect to decide on the best one. The intermediary is expected to advise the prospect with complete disclosures and transparency.. After the sale is effected, the intermediary must coordinate effectively between the customer and the insurer for policy servicing as well as claim servicing.
- IRDA has prescribed regulations for protecting the interests of policyholders casting obligations not only on Insurers but also Intermediaries. These prescribe obligations at the point of sale as well as policy servicing and claims servicing.
Tips on dealing with Insurance Intermediaries
While dealing with Insurance Intermediaries, check out the following :
- Ask for and check whether the person holds a valid license and is authorized for the particular business. For example the Intermediary should be licensed to sell life insurance or general insurance or both (holding a composite license). A referral always helps.
- Check whether he or she has a good knowledge of various insurance products/policies.
- He or she should understand your needs and what you are seeking. Always ensure that you consider only products that you can afford. Beware of tall promises and over-selling tactics. Consider only what you can afford.
- Ask questions and understand the policy terms and conditions of the policy the Intermediary is trying to explain to you.
- You must be satisfied that you understand what your commitments are. What are the payments or amounts that you have to bear not only when you take the policy but when you surrender it or when you make a claim.
- Ask for brochures and sales literature pertaining to the product you are considering or the intermediary is trying to sell. Get the intermediary to explain the full facts of the products, scope of cover and exclusions, as applicable.
- Insist on quality delivery and timely service. You can judge this by the turnaround time of the intermediary during the period of pre-sale when he or she is dealing with you.
- Fill up the proposal form yourself. Never ever sign on a blank proposal form. If you find terms in the proposal form that you do not understand, ask the intermediary to explain it to you.
- When you make premium payments through an Intermediary, check whether heis authorized to do so by the insurance company and insist on a duly signed receipt immediately.
- After receipt of your policy, go through it thoroughly and if you do not understand certain terms contact your intermediary and get them explained. Remember, for life insurance and for health insurance policies of a term of three years or more, there is a free-look period within which you may return the policy if you do not agree with the terms and conditions therein.
- Ask the intermediary questions about documents and procedures involved in making a claim and understand them completely. In the event of a claim, there may be other agencies you may have to intimate apart from the insurance company. Get complete details about what you are expected to do.