When an agent approaches you with ULIP product; before filling up forms, he should be explaining you what is a ULIP and how it works! You should ask him the following 6 questions to make sure you know what you are about to buy!
1. What are the returns offered by this ULIP?
As per the rules of IRDA, an agent should explain you the workings of ULIP with an assumptive illustration earning 6-10% returns. However, if he claims that in the long term the policy is expected to give more than 10% then this information is not misleading. But if he claims that the policy ‘WILL’ earn 18-20% or even Million% returns, you need to stay away from such agents!
2. What are the Charges applicable in this ULIP?
He should give you detailed Information on all the charges that are/will be applicable to ULIP. The important charge you need to know is Premium Allocation Charges. If he doesn’t disclose any Charge that is applicable then I am sure it’s not because of his dishonesty and no other reason. Ask him the company brochure mentioning the exact charges where all the charges are listed and explained in detail.
3. How does it suit my Risk Profile and fit in my requirement?
Before suggesting you the ULIP the agent should have asked you all the details about your Cash flow (Salary, Expenses) and your future goals with ULIP investment should be addressed. He should also try to understand if you can take the risks associated with the ULIP. If he does not ask you these things then you ask him back why he has not asked you these questions. Get the word out of his throat!
4. How is it better than other ULIPS?
Ask him what is unique with the ULIPs he is recommending to you and make sure he does start all non-sense of Sec 80C benefit and high returns and all… Every ULIP has it! Ask him what are the special features with ULIP and how do they address your requirements. If he claims that his company ULIP is the best and no other ULIP can match it then ask him for references if any states that. Just a plain claim from agents will not do. An agent must have enough knowledge to make you understand how to make best use of your ULIPS.
5. How does it score over Term Insurance + Mutual funds combination?
Best Ulip Insurance plan are combination of Insurance and Investment produce, There is no point in taking it, if it can’t perform better than Term Insurance + Mutual funds SIP. Switch benefits in ULIPS are the main benefit in ULIPS. He must put pressure on that point, If not he is himself not aware of it. Refrain from taking the policy if he starts claiming that returns from ULIPS will be much higher than Mutual funds.
6. What was the performance during Market Crash ?
Agents generally try to put up rosy picture and hence refrain from disclosing the funds performance in bad markets. If the fund has done bad, that is acceptable. Its investor responsibility to take care of switching and asset allocation. So there is nothing wrong in performing bad in bad markets. Agents will first try to avoid the confrontation, but finally may tell you that they did bad and returns are very low. Ask him for exact number in return and try to find out how other ULIPS performed.
My personal Experiences
I have never come across any ULIP agent who has tried to sell the product in a professional manner. This has its own reasons like meeting Sales Target pressure or poor training to Agents. Anyways, it’s not acceptable and cannot be accepted. For so many years, Mis-selling is happening in India.