For all the insurance policies that you have ever bought, have you ever made the effort to read through the fine print (the Product Summary aka the Terms and Conditions) and the Adviser’s Recommendation (things that your Financial Planner will write on why the insurance policy is recommended and sold to you)?
If the answer is no… my personal advice is that you need to take some time out, take out your policies and flip through pages and make sure that you understand them. Still confused or shocked after reading them? It’s time to date your Financial Planner out!
There are a few reasons why I am suggesting this:
— The Insurance Policy’s Terms And Conditions
#1 – The Marketing Brochure Is Never Not The Full Terms And Conditions
I have seen customers who bought insurance policies based on the content of the marketing brochure.
So what’s wrong with that? A marketing brochure is usually just a summary of the list (full or partial) of benefits that come with the insurance policy. Most of the time, a marketing brochure only states the good things that you can expect (e.g. the maturity benefits or the lump sum payout upon a diagnosed condition).
But if you refer to the Terms and Conditions that come with the policy contract, you will definitely not get the same positive experience. You will still get the same list of benefits (or even more) but you get to read on how you get to enjoy these benefits and what are the limitations.
For example, a brochure may states that one can get a lump sum payout if diagnosed with Total and Permanent Disability (seems like it is easy to make a claim) but when you refer to the contract, the definition of this Total and Permanent Disability gets expanded on and in order to be eligible for a claim, one has to meet certain conditions like the condition must be before the age of 65 or 70 and it must be persistent for at least 6 months and there must be no indications that there’s still earned income.
So if you have the thinking that a marketing brochure is all you need to understand what your insurance policy is about… I would suggest that you think otherwise and start reading up on those actual fine prints.
#2 – The Fine Prints May Differentiate One Insurance Company From Another
If you have gone through some of the brochures from different insurance companies, you may notice that almost all the companies offer the same list of benefits but they differentiate each other in terms of pricing.
So does it mean being the cheapest is the best? That may not be the case until you refer to the actual terms and conditions. For example, I have seen an insurance company offering the cheapest premium for a hospitalization plan with almost the same list of main benefits as the rest of the market but when you refer to the full definitions of the benefits, a few of the benefits come with stricter conditions or they are not as comprehensive as compared to the others.
Insurance Policy is a long term commitment unlike any consumer products so you have to take this into consideration and determine if a lower premium plan is better as compared to paying a bit more but you get a much more comprehensive coverage in the long term.
#3 – Understanding The Fine Prints Makes Any Claim Processes Easier And Smoother
Making an effort to understand the terms and conditions that come with your insurance policies will also make it easier to process any claims.
For example, a plan that receives many claims is the Travel Insurance Plan and it is always good to check out and read up on the details like how and when you can make a claim for medical reimbursements (e.g for food poisoning) as well as for flight delays (e.g. more than 6 hours) and trip cancellation refunds.
If you know what is required to fulfill a claim, you can get all the necessary paperwork done (e.g. getting a doctor’s memo or report, a note from the airport or photographs) before you go down to file your claim.
— The Advisor’s Recommendations
Understand Why The Insurance Policy Is Recommended And Sold To You
Besides the Terms and Conditions Page, the Advisor’s Recommendation Section is also a must for you to check out and understand. Most people do not read this because they know the Financial Planner personally and they “trust” whatever is recommended and sold to them.
With a growing trend of insurance policy being recommended off the counter (e.g. when you visit the bank), it is a good practice to read through because it contains valuable information like why that particular insurance policy is recommended to you and how did you arrive at the type, policy and policy term and the premium.
This section should also contain a summary of your concerns (e.g. risk appetite) and anything that is of significance (insurance or budget related).
So if you want to be on the safe side and get a peace of mind that you have bought the right kind of insurance policy and that the Financial Planner is not selling you a policy to enjoy bigger commission or simply to hit his/her monthly quota… you will want to read through what your Financial Planner has written down. It is also advisable that you read through during the “free-look” period which is a 14-Day period upon receiving your insurance policy contract and you get the choice to accept without changes, terminate or make changes.
If there’s any situations whereby you are mis-sold by the Financial Planner, the planner may still be protected if the advisor’s recommendation states that you have literally agree to it (especially when your signatures are on pages and on the disclaimer section that you have gone though the policy contract, recommendation and you agree to all the terms and conditions).
Protect Yourself And Give A Peace Of Mind
Buying an insurance policy can be a long term financial and emotional commitment and you will definitely want a plan that suits you.
If you have decided to commit to one, please make sure you make some efforts in going though and understand the Product Summary Page where the terms and conditions are as well as the Advisor’s Recommendation Page. Please also do so during the “free-look” period which is the 14-Day period upon receiving your policy contract.