We’ve all heard the horror stories.
That rogue agent that disappears after the sale.
The claim that was rejected.
The policy that was massively overpriced and unsuitable.
Everyone seems to have heard of such miserable experiences. Life Insurance seems to be fertile breeding ground for the stuff of these nightmares.
So rather than just hear about them, we’ve decided to pen down how best to experience such misery and pain for yourself. Get your pen ready to take notes.
And yes, the previous sentence was satire. This entire article is. But I’m sure you know that already.
Just do the exact opposite, ok?
1. Be swayed by Gifts and Freebies
Life Insurance has always been a product that has to be sold, instead of being bought. This means that Insurance Advisers have to actively sell the product since it is not something that average Joe wakes up one morning and decides to buy.
One common sales tactic is to give inducement gifts that tag along with each purchase, usually with the intent of selling a larger case size or a particular basket of products.
There is absolutely nothing wrong with taking advantage of the gifts and freebies, as long as you genuinely need the product and it fits into your financial plan.
More often than not, people get swayed by the vouchers or electrical appliance placed in front of them and all reason goes out the window.
The benefits – and commitments – of a policy usually outlive the usefulness of any inducement gift you may receive.
Long after you have spent the vouchers and while the toaster lies gathering dust in the cupboard, your policy committed still carries on – and guess who still has to pay for it? If it was the incorrect product – or of the incorrect premium size for your needs – you will have to continue living with that same mistake or suffer a financial loss.
2. Rush into a decision
Haste makes waste. The corners we cut can sometimes come back to haunt us and purchasing insurance is no exception.
Linked to freebies, which is usually for “a limited time only”, rushing into a purchase decision is never a good situation to be in.
Meeting up with a Financial Adviser can seem like a chore at times, given the lengthy sessions involved and your packed schedule. So it can be tempting to just say yes right there and then.
Either reason for rushing into a premature decision can be disastrous. Your actual needs may not be fully met, and you may end up paying for products that you do not require. It may not be an epic tragedy of Greek proportions – for now – but when you actually face the need to make a claim, there could be plenty of sorrow to go around.
Which leads us to our next method of having a miserable buying experience.
3. Not doing your Homework
Back in the 80s, there was no such thing as the internet. Ergo, information asymmetry was a very real problem. People just did not have easy access to sources about Life Insurance and also regarding their policies.
Fast forward to today, where 256k modems are considered antique and everyone’s grandmother has a facebook account, the internet age has truly been a great leveler when it comes to access to information.
There is simply no reason to walk blindly into a purchase. People spend ages reviewing watches, cameras, cars, and even lipstick before they make a decision these days. There are forums, review sites, and blogs out there to suit every product and interest.
So why skip the due diligence when it comes to insurance? (Ironically, people spend the least time researching the items that have the most financial impact. Eg Stocks, Investments, and housing)
The most trusted of advisers would never begrudge you for learning more on your own – in fact, they welcome it. An informed customer is a happy one, and more likely to stick to the purchase.
4. Ignore the fine print
Insurance companies are in business to make a profit, and one of the ways they ensure their profitability is by limiting their risk. That may sound a little odd at first; since firstly they are in the service of risk management.
Also since no one lives forever, as long as a life insurance policy is in force, the company will eventually have to pay out the death benefit. Insurers try to protect themselves from paying claims for people who die younger than expected by excluding some causes of death, like suicide or dangerous activities like skydiving.
They also limit their risk by the use of exclusions and other terms in the actual insurance contract – the fine print. Part of your insurance shopping process should include reviewing actual policies from various companies. Looking for and understanding exclusions is especially important because they can be used to lower the premium of seemingly identical coverage from different companies.
We will explore the typical fine print more in detail in an upcoming post.
(Note that fine print should not be a deterrent in obtaining cover, just that we encourage everyone to understand what it is before committing)
5. Be untruthful
When is it ok to lie? To tell a white lie? Perhaps to be diplomatic during a social or business setting.
There are instances where white lies and even lies have their place, but as far as insurance purchase is concerned, we all ought to be angels of truth – except that we aren’t.
Things like a high/low BMI, smoking, pre-existing conditions often skew the price of premiums upwards – sometimes even leading to rejection of cover by the insurer.
(Those with overly high BMI can pay up to double the premiums of a standard rate, and we explored the extra cost smokers have to pay for insurance in this article here.)
So during purchase, you may be tempted to declare a different BMI. List yourself down as a non-smoker even though you puff like a chimney. Or even neglect to declare any medical conditions you have.
You may get the policy through without a hitch.
You may enjoy the lowered premiums.
You may not have to ever make a claim – thus everything works out for you.
But someday, you might actually have to claim.
That’s when not telling the truth will come back to bite you – and hard.
Angela found that out the hard way here – and to her, it was not even a very significant declaration to make that time.
Life Insurance is a contract between you and the insurer, and to be upheld following the doctrine of “Utmost Good Faith”. It requires both buyer (you) and seller (insurer) behave honestly towards each other and not withhold any critical information.
Think of it as helping yourself – even though it may cost more, or be a little inconvenient right at the start.
Summing it all up
Buying Life Insurance doesn’t to be overly complicated nor will it end up being miserable for you – provided you adopt the right approach.
For the vast majority of us, our Insurance purchasing experiences are smooth and hassle-free – even when it comes to claims.
Share this article with friends who may be about to buy some insurance – you make just save them a whole load of heartache and disappointment in the years to come!
www.ClearlySurely.com aims to eradicate the knowledge gap between consumers and Life Insurance. Our Vision is that one day, every Man, Woman, and Child will be properly insured.