Being well-regulated and closely monitored financial institutions, banks are often considered to be safe havens for investments and savings. This extends to the insurance sector as well, where in many customers these days look towards banks as their preferred outlet to buy policies.
Granted, banks may appear more approachable than insurance companies. However, this doesn’t mean you should not do your due diligence before purchasing an insurance policy from a bank. Don’t feel embarrassed to ask around about the various options available or obliged to buy an insurance product from the same bank with which you have a savings account.
Things You Need to Consider Before Investing in an Insurance Product
While your bank may be committed to you and your interests, you should know that they have to serve their business interests too. Hence, consider your needs carefully to decide on the right product rather than letting a personal banker decide on your behalf.
- Shopping around: Before buying an insurance policy, you should compare rates, benefits, riders, yield, and more from websites that educate you on different insurance plans and lay out the similarities, differences, pros, and cons so that you can choose the most appropriate cover for yourself. Remember that for each insurance category, a number of products are available in the market. By looking around, you can get a product that covers you perfectly.
- Understand your needs: Are you looking for an insurance product to provide you with suitable cover against critical illnesses, accidents, disability, or some other mishap? Or are you looking at it from the perspective of investment where you can save for some time and get a relatively risk-free return? Once you know what you want, it becomes easier to tally the features and benefits of a product with your expectations to see how closely they match.
- Understand the terms and conditions: Reading the offer document carefully is a must. Before you sign up, give yourself ample time to understand the various exclusions, riders, premium, the concept of NCD, other costs, free-look period, the process of claim, etc. and the benefits to have a clear idea about the product.
If the product offered by a bank is underwritten by an insurer, the terms and conditions imposed by that insurer may overwrite the conditions set by the bank. Carefully read the offer document and visit the website of the insurer to pore over the details.
- Don’t feel obliged to buy: A personal banker may take you through the benefits and leave out certain conditions that may come across as less pleasant than others. To get a more neutral assessment of the product, you can visit an independent financial analyst to get a better idea of a product.
You can also discuss the various clauses of a scheme that you have narrowed down to with your friends or family before subscribing to it. Take your time before signing on the dotted line.
- Be honest while filling out the insurance form: Health insurance plans may have a pre-existing health condition exclusion period clause under which full or partial benefits may remain frozen for a certain period from the date of issue. Other insurance products too may have their own preset conditions based on which you can make a claim. However, it is important for you to disclose all necessary details to avoid complications and possible penalties in the future.
- Carefully weigh in on the risks, if any: Are you planning to buy an investment-linked insurance policy? If so, carefully analyse the risks involved before putting your money on it.
- Beware of the joining perks and gifts: A lot of banks offer gifts, subsidies, and other joining perks with their insurance products. While an attractive gift or a considerable discount is always welcome, it shouldn’t cloud your judgement pertaining to the suitability of the product.
Before investing in a plan, think about the tenure and see whether you have a comfortable capital cushion for paying the premiums on time throughout the entire duration. Remember, that it is not a one-time payment. Hence, after keeping enough money aside for contingencies and your other needs, you’ll need to have enough to pay the policy premium.