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It has to be said that the financial industry has not always had the most spotless of reputations and you don’t need to go far to hear a beef from someone who has been mis-sold a life insurance product.
Any attempt to sell a financial product or service by misrepresenting that product or by misleading an investor regarding his or need for it could be described as mis-selling and is a questionable practice from an ethical point of view. However, to the lay person many of these products can be confusing and it can be difficult to know whether you are getting the right advice or not.
Here are five questions to ask to make sure you are not falling victim to mis-selling.
Ask yourself if you really need the product someone is trying to sell you. If you have dependents who would be financially vulnerable should anything happen to you then life insurance is a must. Life insurance may not be necessary if you are single and have no children, but you may still want to consider taking it out when you are young because buying it later in life will be more expensive and you may not stay single and/or childless for ever.
Some less reputable financial advisors may imply that insurance is compulsory in certain circumstances (e.g. when taking out a loan) even if it is not. This is illegal as it is conning you to take out cover. If you are in doubt, seek a second opinion. Be wary too of salespeople who try to bundle insurance products together, you may not need all the products they want to flog you.
The point of life insurance is to protect your family should anything unforeseen happen to you. In many cases it is a tool to replace lost income and should be carefully calculated based on your outgoings including your mortgage and other debt repayments, healthcare costs, childcare costs, living expenses and so on. If you are being sold life insurance but the seller doesn’t take time to work out your requirements based on actual figures, you may find you have a policy which is not suited to your personal circumstances.
Similarly, life insurance should cover you for the long term. Treat anyone selling you short-term products with suspicion.
All those medical details required on insurance forms are important so warning bells should sound if anyone selling you a product skims over these. An agent with sales targets to meet may solely be interested in notching up a sale and not bothered about if or when you make a claim but if the questions are there, they are important, so take the time to understand them and answer them correctly. Not declaring existing medical conditions could well declare your policy null and void.
Handwritten calculations smack of exaggerated predicted returns by agents desperate for a sale. Insist on seeing company illustrations for predicted returns either on printed materials or the company website to ensure that the individual selling you the product is not exaggerating potential benefits.
Never feel pressurised into signing a contract which you have not fully read and understood. You wouldn’t just sign on the dotted line without reading an employment contract and neither should you sign up for insurance products without knowing the exact details of the policy including named beneficiaries, surrender value and grace period. A good financial advisor will take the time to answer all your questions in detail and may also be able to advise on whether your life insurance could form part of your inheritance tax plan to cover the capital gains payable by your beneficiaries upon your death.
Unscrupulous insurance agents will play on the basic human emotions of fear and greed by offering high returns with little risk. Be very wary of any products which seem too good to be true – they probably are. At Infinity we strive to uphold the highest possible standards and would never try to mis-sell a product. We carefully select products which match the requirements of our clients.
If you would like further information about life insurance, as well as other types of peace of mind insurance such as critical illness cover and health insurance, you can download a comprehensive consumer guide to insurance here. Alternatively please feel free to make an appointment to speak to one of our professional financial advisers.