While buying life insurance through an agent, he should inform you of the products suited for you. But sometimes insurance agents may be misleading. They may withold certain information, resulting in purchasing a product that is not suitable for your needs.
Here are 5 things that your life insurance agent will not tell you;
Just because you have an income, you do not need life insurance. Life insurance should be bought only by someone who has dependents. Dependents can be parents, spouse or children. Otherwise life insurance is not required and it is actually a waste of money.
The agent will try to sell you traditional insurance like endowment plans and money back policies. He will try to convince you that it is unwise to pay premium and get nothing in return. However, remember that mixing investments with returns is a very bad idea.
One should always purchase a term plan and get bigger coverage at much lower premiums. The rest of the money should be invested in mutual funds. A point to note, an insurance agent receives more commission on traditional products and hence will push you to buy it.
When making any investment, the return is a very important consideration. The return a money back policy will give after 15, 20 or 25 years will seem substantial. However, in the future, those returns would not be significant, after factoring in inflation. In fact annualised returns from traditional plans are around 5 per cent. These returns are even lower than that of fixed deposit and will fall much below inflation levels. So the returns which your agent is pitching you are actually very poor. Do not fall for it.
ULIPs also are a mix of investments and insurance. They allow you to invest in mutual funds of your choice and enable you to get market linked returns. However, even then the cover you get from ULIPs is not adequate.
The life cover offered by ULIPS is a maximum of 10 times your annual premium so that you are entitled to tax benefits. So, the insurance cover will be much less than you need. You should first get a term insurance of adequate amount and then invest the rest. Financial planners will never recommend you to buy ULIPs.
Often your agent will pitch you a new policy and point out the numerous features it has. Remember that an agent gets commission on every policy he sells. He may be selling you a new policy even when you may not need it. Having too many insurance policies also does not make sense.
Insurance agents will be ready with a sales pitch that will sound convincing. One needs to be informed to purchase the right life insurance.