The games that insurance agents play-Beware of an Agent

THIS is the third call I’m getting today from an insurance company”, Shashank fretted to his friend Sudhir. Sudhir looked up from his work and just said, ”What’s new? I got four calls today, myself”.

Not surprising. For many it is a new calling (pun unintended). Insurance has become the refuge of many a mutual fund distributor, as that business has folded up since August 2009. The insurance agents have quite a few tricks up their sleeve. Not everyone is bad and uses these unsavory tricks. But, you better know them. Here they are:

1) Old wine in a new bottle
The agent is constantly on the lookout for business. If organic growth becomes a problem, existing patrons come in handy! That is when you get calls to surrender the three year old ULIP (unit linked insurance plan) to put it in, what else but another ULIP or ULIP based pension plan. Only that the insurance product charges are front loaded and you would have just completed paying most of the charges in the first product and now you could start off with the second one.


2) Government guarantee!
This is a ploy used by LIC (Life Insurance Corporation) agents. They keep talking about sovereign guarantee. Guarantee in a traditional product is only for the sum assured. Every insurance company (including private players) guarantees the payout of the sum assured. It is only the bonus payout that is not guaranteed. For ULIPs, this anyway does not apply. So, this is a total con game.

3) New products that no one has heard of
Heard of Jeevan Amrit or Jeevan Sadhana? These are not LIC plans. They are plans conjured-up by putting together a few insurance products of LIC . Also, interestingly, the payouts which come in at various points are assumed to be invested in National Savings Certificate, Public Provident Fund, RBI Bonds etc. Then they calculate the returns and tell you that their Jeeven Amrit or Sadhana gives 8 -10%. Don’t be misled by this. The higher returns are because of these other products, not insurance. I have still not understood why they should show reinvestment in other products, when they are talking about insurance. And, how someone falls for these.

4) 6 & 10% returns in a traditional product
Recently, I found that a client of mine has gone for Jeeven Saral, a traditional policy of LIC. However, the agent had given an illustration with 6% & 10% returns! This was to be used for ULIP policies, where this is a possibility. In traditional policies, 10% return is virtually impossible. You would readily understand, why they use it then.

Must read: Beat your bank deposits with endowment policies

5) Insurance on the child
There are products for the benefit of the child, where the child is the insured. It’s absurd, as the child is a dependant and insurance on the child is of no practical use. Yet, these kind of products are sold and are bought by emotionally charged parents, ending up with a bloomer.


Sudhir clutched his head when he came to know of these. He just bought a child insurance on his daughter and he remembers buying a Jeevan Aradhana or some such product, which is one of those 'intelligently' packaged ones.

For those buying financial products, a basic level of financial literacy would help. Studying and doing some basic research, is a good idea too. If one is not sure, get an unbiased opinion from someone who knows about insurance. Else, it becomes a costly mistake, which lingers around for years.

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Courtesy-Moneycontrol.com

Prerequisites for Wealth creation
The most difficult task for any individual today is to choose the right path to fulfill his goals with the availability of end number of instruments; a layman could be over a fix over where to invest and at what time and in which segment?
Investing in a market could be a tedious task but understanding its functioning and behavior could reap tremendous benefits also. The foremost trait and must eligibility to create wealth is the habit and discipline.As said habits and disciplines makes a man and the same holds true for financial planning.
A) Habits: Most of us do not believe in the habit of regular saving as for the young people they believe in expending only but the off late debacle in 2008 has given ample lessons of value investing.
B) Discipline: Since expenses cannot be stopped and life has to move on in order to tackle this, one should have a pool of wealth, which cannot grow until it is not multiplied or earned. To take on liabilities which would arise over a period of time one should have a financial plan and assets which could offset the inflation and expenses over a period of time.
C) Assets: Assets could be in the form of land, property, liquid cash, deposits, shares, mutual funds etc. Acquiring assets is a critical task and one should have the right guidance and wisdom for the same otherwise the strategy could back fire.
D) Goals: One must have a long term and short term goals in written it helps in devising strategies and working in the right direction.
E) Plans: A tedious task is to plan out the investment and make a roadmap for achieving the same. Planning helps in assessing the overall information beforehand and provides an edge for any unforeseen situations.
F) Review: A yearly and a short term review are utmost in order to achieve a goal. One has to assess whether he is going in the right direction or not. If it is otherwise never wait for more, try shifting to the profitable instruments or ventures as nothing is certain today. One has to be vigilant always. Since it is a self goal so don’t depend on others for every action.
G) Financial Guidance: Information today is available everywhere so one could find anything he intends to dos so, if there is a problem in understanding the complete aspects one could take a help of certified financial planners. Beware of an agent who for hefty commissions lures customers.
H) Common sense: The most critical is common sense which is not common at all. Everyone who guides you to something has a vested interest in it so always be extra vigilant while taking advises. Most of the questions are answered on its own if one tries to dig out something. If anyone luring someone it clearly suggests something terrible.
I) Over dependence: We all know knowledge is the key so why take chances, cultivate the habit of acquiring it. Don’t depend on anyone –since it is your money-in the end you can’t blame anyone. knowledge if applicable never fails anyone, a systematic approach towards investing in a disciplined manner can lead s to wonders