Wednesday, January 22, 2014

Insurance policy mis-sold?

Are we all victims of insurance policy mis-sold? The answer is NO. The insurance policy is always mis-bought !!!

Let me give you my own example. In the month of January (3 years flashback), I called my agent and asked him if he had policy with good returns. Also told him that this policy must save my tax (this was the primary concern). He off-course gave me an endowment policy (name of the company does not matter at all) and saved my tax. I did not take the pain to research on the product, calculate the returns, understand the amount of coverage that I got, the inclusions and exclusions of insurance policy. I did nothing of that sort and bought the policy. I was happy with the policy and my agent. He came to my place regularly for collecting cheque and gave me the premium receipts. I was happy that my insurance part was taken care of and i was getting good amount of interest on my investment too.

Did somebody say ‘ignorance is a bliss’..... Yes it is..... I religiously continued paying my premiums for 3 years and slept peacefully. However, one day I read some useful articles on endowment insurance policies and bliss was broken. At first, I was reluctant to accept my mistake. I thought the author of the article had ulterior motives. So I went on and searched more articles on endowment plans. After reading through the articles, I was like ... phusssssss.. sala locha ho gaaya....

The return on endowment plan seems to be around 7% (I do not have data to support the number). Suddenly, the shortcomings of the policy were in front of me. It was the most rigid (opposite of flexible) product, did not give me real return on my so called investment and to top it all I was underinsured.

I was about to curse my agent. However, on slight thinking I understood that he did what I told him or what I asked from him. It was my duty to research and understand the product. I had not done my part of work before buying insurance product. This justifies my first line of the post that the insurance policy was not mis-sold to me, I had mis-bought it.

Note: I immediately surrendered (and not paid up) my policy and took a policy which would adequately cover me. The loss was substantial but as Ashal says amputation of a finger today is better than amputation of an arm tomorrow.

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