A study reveals that India has the worst persistency rate when it comes to insurance. Which means a large number of policies are either lapsed or terminated prematurely, which results in huge losses for the policyholders. So how can this be avoided?
To begin with let’s look at some of the common mistakes that customers make while purchasing insurance.
- Insurance for Tax Saving
In India, there are many who buy insurance just before the end of the financial year to save tax. Most of them don’t research enough and buy a policy in haste, to meet the Tax Investment deadline. Many of them later realize that they could have opted for a better plan. Such policyholders terminate or surrender their policies prematurely and have to bear the losses.
- Insurance as Investment
There are some who invest in insurance with the intent of earning high returns but fail to understand that Insurance’s primary objective is to offer financial security, during an incidence. Insurance policies like ULIP’s offer good returns if the customer remains invested for a long time. Moreover, the returns from insurance plans are tax-free which is not the case with pure investment products. People looking for higher returns often surrender their policy prematurely and have to bear the loss.
- Over Commitment
Then there are those who opt for a high sum insured without realizing that they would have a commitment paying the high premium for the full payment term. These are the ones who miss out the payments and their policy lapses.
- Lack of understanding
A lot of people buy insurance based on the suggestions from friends and relatives and don’t make the effort to research and understand the policy. As a result, the outcome of such policies does not meet their expectations. It is important to research and to an expert before finalizing a product.
To mitigate this loss, Insurance policies have an inbuilt feature called Free Look Period. This provision offers a grace period of 15 days and allows the policyholder to go through the policy details carefully, understand the details thoroughly and if he is dissatisfied then he can cancel the policy and get a refund.
The Customer should also be well aware of the policies, restrictions, and exclusions of the policy and should seek help from insurance expert even for their slightest of doubts. If you have any queries regarding your existing policy or any new policy then feel free to contact us at 86559 86559 or send us an email at firstname.lastname@example.org.