Have you been mis-sold an insurance policy?

Most of us have purchased at least one insurance policy that we have regretted later on. Either the premium was more than what we were told, or returns were not as projected. The problem of mis-selling is so rampant that even the regulator has addressed the issue in its latest monthly journal.

One common complaint is with regard to the frequency of premium payment. Customers are told that the policy is a single premium but it turns out to be a multiple premium product.
There are some steps that customers can take to avoid buying a policy that does not meet their requirements:-

1. Look at the premium you paid and check if it is the same mentioned in the policy bond.

2. While signing the loan documents, check the insurance policy document too. Since you are creating an asset while buying a loan (home in this case), don't get into another savings product, which will only add to your liability.

3. Customers must also check if the maturity date and age of the insured mentioned in the policy document match. For instance, if the policy term is 10 years and the customer's age in the document is 45 years, then at the time of maturity if the customer's age does not match the maturity age, the claim could be get repudiated.

4. Sometimes the customer agrees to buy one particular product, but the agent while filling up the form chooses another one because it offers higher commission or to avoid medical test. And often customers pay two or three premiums before they realise it. One should also check the benefit illustration and to know how much of the premium goes towards charges.

5. Another problem is when you are sold a policy bundled with a loan product, like a home loan. In such a case, make sure the policy is a term life policy and not a savings product.

6. Insist that the product name, your age and policy term is filled up in front of your. Or use the verification call and free-look period to cancel the policy if it does not match what the agent told you. That is why it is important to preserve copies of benefit illustration and product features.

7. Another big problem is the product-need mismatch. Most customers buy insurance to save tax, and in the process end up paying Rs 25,000 as premium for an insurance cover of only Rs 2.5 lakh, whereas the same premium could have bought the consumer a Rs 2 crore term plan. Customers often buy products to maximise tax savings and returns rather than sum assured. To avoid this there should be better communication between the buyer and seller.

8. that is why today most companies have a suitability matrix profile and agents are supposed to sell only those products that match the customer's profile.  An agent is supposed to sell a policy only after doing a need-based analysis. For this he must ask questions related to customers' investment objective, time horizon, income, existing investments and risk preference. If, for instance, you require money after 10 years, then the agent should not sell you a policy that matures in five years.

If you are not sure consult someone before you buy the policy. 'Insurance companies may train agents to do need based selling. But who can verify if it is happening at the ground level? Customers must on their do due diligence before buying an insurance policy.