The insurance sector in India has penetrated on a greater scale today. Many insurance companies have introduced various insurance products for your betterment. According to a report, over 65% of the Indian population purchase a life insurance policy to safeguard them financially from the uncertainties. Whether you purchase a traditional insurance policy or a non-traditional plan, the primary objective of financial security can remain the same.
Since there are several insurance products to choose from, the chances of miss-selling can be high. Amongst the many insurance products, a Unit Linked Insurance Plan (ULIP) can be miss-sold at large. The ULIP plans have re-emerged in the market again after being severely criticised due to high costs. Although a ULIP plan has been re-introduced, many insurance companies or the insurance agents might not sell it properly in the markets.
Before we learn how to not get miss-sold on your ULIP policy, let’s first try to understand what is ULIP policy in brief:
A ULIP policy is a financial product, which can provide two essential benefits under a single integrated plan:
Under a ULIP policy, you can offer financial assistance to your family members in your absence. To safeguard your family financially, a ULIP plan can provide a pay-out called the death benefit after your demise.
With a ULIP investment, you can diversify your portfolio. When you purchase a ULIP policy, you can invest in either equity funds or debt funds based on your risk appetite. Additionally, you can avail the switching feature to secure your funds from market volatility.
Although a ULIP policy offers dual benefits, you might still be sceptical of ‘why should I invest in ULIP?’ Many of you might assume that a ULIP plan can be an expensive product since it is a combination of investment and insurance. Due to your lack of knowledge, your insurance agents can miss-sell the ULIP plan. Therefore, let’s understand how not to get miss-sold on your ULIP policy:
- Read the benefit illustration
Due to the increasing miss-selling of a ULIP product, the Insurance Regulatory and Development Authority (IRDA) has made the ‘benefit illustration’ a mandate. The benefit illustration can be a summary of your whole ULIP policy. Reading the benefit illustration of a ULIP policy can help you to understand the ULIP plan in detail. Typically, the benefit illustration might comprise of the following things mentioned below:
The charge structure of a ULIP policy has changed after the new rules were announced by the IRDA. A ULIP policy, which was once known for its high costs is known for its affordability today. Moreover, it consists of the most common four ULIP charges, as mentioned below:
- Policy administration charge
- Premium allocation charge
- Fund management charge
- Mortality charge
Apart from high costs, a ULIP policy was previously also bashed for offering low returns. However, it is no longer the case today since you can receive better returns based on your fund selection, risk appetite, and market volatility.
A ULIP policy can offer more at a low cost. When you read the benefit illustration, you should check for the ULIP benefits. Identifying the benefits of a ULIP policy can help you to understand how much you can expect from your selected policy.
In a nutshell, miss-selling can be a major threat while purchasing a ULIP policy. Therefore, you should conduct thorough research on ULIP policies and compare different options available in the market. Additionally, you should choose a credible insurance provider, which can offer more benefits at an affordable cost.