Why ULIP mis-selling has become rampant ?
Why is there so much mis-selling of ULIP? How to avoid this mis-selling? Who should take ULIP?
The insurance sector in India has an interesting mix of players and an equally good number of insurance products. When it comes to life insurance, individuals can choose from Term Insurance, Term Insurance with return of premium, Unit Linked Insurance Plans, Endowment Plans, Group Life Insurance, Child Insurance Plans, Retirement Plans and so forth.
While the availability of choices is a good thing for customers, choosing the right policy can sometimes become and overwhelming exercise. To make things simple, one must keep these four key points in mind before selecting a policy that is most suited to their needs:
Goal setting
To begin with, it is imperative to be clear about one’s ambitions and requirements over the years and do a goal-setting exercise. An ideal insurance plan should match the pre-defined goals such as safeguarding the dependents’ future. A Term Plan with affordable premiums and high cover could be a good choice for young individuals. One must also consider investing in a Retirement Plan. This will build a corpus with regular income inflow in your later years and ensure a comfortable post retirement life.
Analysis
Once you have listed down your requirements and goals for the near and long-term future, doing a thorough research about all the products is a must. Do an analysis before deciding on a specific insurance plan amidst the plethora of products available in the market including guaranteed plans that come with income options along with a life cover. Find out the type of plan that will meet your needs. Request call backs from advisors from reputed insurance companies to understand policies better.
Deciding the term
Paying the annual premium till the end of the paying term always has better benefits. This ensures financial protection for dependents. The maturity benefit is an added advantage where the accumulated sum is given to the policyholder once the plan matures, provided one has paid the premiums on time on a regular bases.
Choosing sum assured
While selecting the right plan is important, choosing the right sum assured becomes key. The sum assured depends upon the Human Life Value (HLV) or the policyholder’s financial worth and takes into account the income, expenses, future responsibilities and liabilities, and financial goals at various life-stages. A lot also depends on the pre-defined and constantly evolving life goals of the individual and the family.
A one-size-fits-all approach does not work while picking insurance plans. It is important to chalk-out one’s own goals, and take the first step in the journey of making insurance, particularly life insurance, an integral part of your future and financial planning.
(The author is Chief Strategy Officer at Exide Life Insurance. Views are personal)