The key to quality insurance 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 product to your door step. Nowadays they have various names like Consultant, advisor, and the like, but I will use the word in its real meaning!

Very many people do not think it is really material as to whether you select a good quality agent or a friendly neighborhood 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 realizing that it is not renewed AFTER you have had an accident. Imagine getting up on your 55th birthday and realizing 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!  Lets’ look at reasons for NOT selecting a person as an agent:

1.      He is a neighbor. This can mean he is available for you, not that he is 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.

2.      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.

3.      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 brainwashing has lulled them into believing all good things happen only in that company and other companies are bad.

4.      Its’ the bosses’ wife: I have absolutely no excuses to offer! Play it by the ear, or get your CV ready!

5.      It is a customer’s wife: keep the premium to the diwali gift level!

6.      Its 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.

7.      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.

8.      The agent / bank / advisor who sold you a plan which somebody knowledgeable called a lemon! If you have been had once, that is enough. Do not repeat it.

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  1. Most of the agents fall into # 7. If you ask them specifically about term insurance, they will say “oh! it is for some high risk people like business men”. and people believe it. I don’t know what’s the difference in risk when it comes to death between a business man and salaried person.

  2. Experience : Bought health insurance from a major agent with online presence and they mentioned they will always take clients side (our side) and help for any claims. Not had any claims till now. Hopefully they will help at the time of need. They were extremely responsive till I bought the policy. After an year, for annual health check up, I had to follow up with 2 to 3 emails with reminders and asking them why there was no response. Again apt follow ups were done at the time of policy renewals. Moral : Not sure if they are going to stand by their words. I have to have Plan B.

    – Choose online policies : If there is difficulty in choosing pay one time fee for qualified person to help you to choose. Have to spend enough time to get educated. (Sorry. No shortcuts). Upfront tell him that you are only getting advice from him. Even if the agents tell that there is no difference in premium if we buy it through them, avoid. As insurance company has to pay them commission from premium. Not good in long term and when numbers get large.

    – Identify few people you trust and are aware of procedures and know details about financial planning. ( Personal financial planners who are fee based )

    – Educate family members about policy. Level of education can vary. But at the least, whom should they approach to find out details for a fee. In quotes for “FEE”. I have personally seen saving few thousands thinking I can do it myself has hurt me in the past. (Dont know if it was because, I negotiated for a very low fee, the advisor did right or intentionally gave average advice, Its my bad that I asked for a low fee). Subra Sir has a separate post on dealing with adviser fees.

    Banks, Agents, Neighbors can all change. Even for that matter the personal financiers identified can also change. But note that agent is going to be only one ( you cant move same policy from one agent to another), and by choosing him we have already paid him his fees ( either in increased premiums or otherwise) assuming he is going to take care. But in the above model you are not paying anyone till you need services and you are free to choose with whom you want to work at a later point when there is need.

    Subra Sir : Request you to publish another book including and categorizing various articles from wonderful blog you have. For instance I remember one blog article where you mentioned how can someone loose money in stock market by following few basic steps, sell immediately at 20% drop in price etc.

    Once again thanks for sharing your wisdom.

  3. Applied the wisdom at #5 to the owner of my house who had doubled up as an LIC Agent 🙂

    That was some 18 years ago, upon landing in an unfamiliar city for the first job in career. Buying that LIC Endowment policy was a pre-requisite to get a decent residential unit on rent. Most comfortable location & amenities, couldn’t say no & decided to go with a policy with the a cover a tad above the lowest allowed by LIC. That meant a gift-equivalent annual premium. Stayed in that home for 6 years before moving out to own flat. That policy is still active, one more annual premium to pay, the next year I will be getting those “maturity proceeds”.

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