Life Insurance FAQs on Insurance Company and Insurance Agent

What are the various channels through which I can buy a life insurance policy?

Traditionally, insurance policies have been sold directly by the insurance company's agent. Now they are even being sold online.

Recently, the concept of bancassurance i.e. the sale and distribution of insurance products through banks has also gained significance. Many insurance companies have tied up with banks to sell insurance products. One of the advantages of purchasing a policy through a bank is the enhanced convenience of receiving financial advisory services under one roof. It also means easy access for premium payments and claims, if any.

How do I choose an insurance company?

A life insurance policy is as good as the company that writes it. If the insurance company that covers you does not have a sound financial status, you might want to consider how long it could survive and whether it would provide you the promised benefits when they are due.

Buying an insurance policy is similar to parking your money in a fixed deposit, although for a much longer term. Always ensure that the company is safe - financially and on reputation. In addition, you should refer to newspaper articles and magazines regarding the strategy and financial status of insurance companies.

How do I know if the agent is a genuine one?

If the insurance agent is at your place, you could ask her/him to show you a copy of their insurance license or their visiting card (which would have the insurance company's name, logo and telephone number).

The easier and simpler thing to do is to call and verify with the insurance company.

What should I expect during an agent's visit?

In order to make your first meeting with an insurance agent productive, it would be prudent for you to provide her/him with:

• Date of birth
• Marital status
• Age of dependents, if any
• Interest in any particular product, if any
• Desired insurance amount or premium budget, if any

Once the agent has the above details, she/he could provide you with details of products that meet your requirements. Ensure that you understand the receivables and payables in the following terms:

• The minimum amount you are insured for (Insurance amount/Sum assured/Face cover)
• The amount your nominee will receive in the event of your death, during the term of the policy (Death benefit)
• The time for which you remain insured (Term)
• The amount of money you pay for the insurance policy (Premium)
• The frequency with which you will have to pay (Premium paying term)
• The amount of money you could expect to receive during the term of the policy (Loans and/or Survival benefits)
• Additional benefits that you could choose to receive along with your policy, at an additional cost to your premium (Riders)
• The amount of money you could expect to receive at the end of the policy, if any. If so, would the amount be guaranteed? If not, what is the indicative return or the company's bonus/profit history so far? (Maturity benefit)

Although the terminology for each plan varies from company to company, usually an agent should be able to explain the cash flows in a policy on the above-mentioned parameters. However, do ensure that you understand all the details thoroughly.

Once you have been through the policy details, the agent may ask you for some more details such as your monthly income, household expenditure, the age of your dependents and calculate your life insurance requirement to suggest alternate products that could match your insurance requirements.

Depending on the details required, the agent could follow up with another visit to provide the same or help you fill the proposal form and get the required information, once you have decided on purchasing a policy.

Can I ask the insurance agent to pay me a part of her/his commission?

It is a commonly followed practice but completely illegal on the part of the insurance agent to pay back a part of her/his commission. What would motivate your agent to service you any further if she/he has passed on a part of her/his income to you? The agent is paid a commission not only to sell a policy but to provide you with personalized services on a long-term basis. She/he receives commission on the policy as long as you pay your premiums.

What are the services that an insurance agent is expected to deliver?

Some of the primary services that an insurance agent is expected to provide include:

• Provide reminders to pay premiums and return receipts
• Help make changes in address, nomination
• Aid the process of assignment
• Assist with loan applications and related formalities
• Revive lapsed policies
• Facilitate the survival benefit process if payments have been delayed
• Assist in claiming death benefits, if required

Why don't agents push term life plans?

Lack of awareness usually leads customers to buy what their agents sell. Consider this - when we buy insurance for an automobile, we buy it to protect ourselves against third party liabilities and damages. When we buy insurance for our homes, we buy it to protect our home against fire and theft.

In that same manner, we buy life insurance because it is an inexpensive way to replace our income in the event of our death. Term life plans are the most inexpensive of these.

But agents earn commissions on the premiums we pay - therefore, the higher the premium, the higher their commission. Insurance agents do not sell the inexpensive term plans - their commissions are not high enough.