The key to quality insurance (or mutual fund) is in choosing a good quality agent. The word agent comes from the Indian Contract Act, 1872 and it is the Christian name for the guy who brings insurance / mutual fund products to your doorstep. Nowadays, they have various names like consultant, advisor, and the like, but I will use the word in its real meaning!
Many people do not think it is really material as to whether you select a good quality agent or a friendly neighbourhood agent. Risk cover and wealth management are both things that you need to plan for much, much in advance before the event.
Imagine thinking you have cover for medical emergencies..but realising that it is not renewed after you have had an accident. Imagine getting up on your 55th birthday and realising that your retirement target amount is 15 years away.
It will be too late to react. So choose an agent carefully. He / she can make your sunset years golden or red! Let’s look at reasons for not selecting a person as an agent:
A neighbour. This can mean he is available for you, not necessarily the best. Typically, if he has meandered in his career and at last decided that selling insurance or mutual fund is his calling that may not be sufficient. Familiarity is not competence.
The brother-in-law, sister-in-law, father-in-law syndrome. Same as above. If they have built a business over a long period of time that is a good basis for selection. Not otherwise. However, they may be biased and may sing the praises of the company that they represent. In the case of mutual funds, there is no tied concept, but with life or medical Insurance you need to be careful.
Length of being in the business - normally this is an excellent reason to buy from a person. However in some cases it might mean that these are not enough reasons. Check if he / she is unbiased. Normally such people get stuck to one company and so many years of brainwashing has lulled them into believing all good things happen only in that company and other companies are bad.
The bosses’ wife: I have absolutely no excuses to offer! Play it by the ear, or get your CV ready! A customer’s wife: keep the premium to the Diwali gift level!
Your bank: They know the exact amount of money in the bank, they know where you eat, how you travel, what school your kids go to, which credit card you have, but if they cannot plan your finances, be careful. They are likely to push their group company product - be vary.
The guy who does not talk about term insurance at all. It is not to say that term insurance is the best, or it is most suitable, but he should offer it to you. He should tell you that there is something called top up in an unit linked plan.
The agent / bank / advisor who sold you a plan which somebody knowledgeable called a lemon! If you have experienced it once, that is enough. Do not repeat it.
PV subramanyam
writes at www.subramoney.com and has authored the best seller ‘Retire Rich - Invest C 40 a day’