If you have dependents in your family, term insurance plan is what you must have to secure their future financially when you are not around. While most financial experts consider term plans to be the most important of all life insurance plans, the insurance agents are not very keen to even talk about it.
The work of a life insurance agent is to understand your financial requirements first and then suggest a plan depending on your needs. Therefore, if you do not have a life insurance plan yet, the agent should ideally recommend you a term plan. But in most cases, what the agents do is suggest a plan that they consider is “the best in the market”. Unfortunately, the customers believe them blindly and end up buying a very expensive plan only to regret it later.
Now, you must be thinking, if term insurance plan is so important, why do the insurance agents do not want to suggest them to you? Here are a few reasons why they do not sell term plans.
Low premiums means lower commission
A term insurance plan is less expensive than any other life insurance policy available in the market. This is simply because term plans offer only death benefits. Since term plans are not investment plans, they offer no returns. In a term plan, you invest for the future security of your family in case of your untimely demise, not for your own monetary gains in future. Therefore, term plans offer comprehensive life cover at nominal costs. Now, the commission that the insurance agents receive, from the insurance company, is a percentage of the premium. Since the premiums are low in a term plan, the commissions are low as well. Hence, the insurance agents are not keen to sell term plans as they cannot make good money out of it.
A life insurance plan without any returns does not interest the customers
Why blame only the agents when customers are also not interested in buying term plans? This is true. A large number of people in India do not want an insurance plan that offers no maturity benefits. Once an agent tells them that there are no returns in a term plan, they stop showing interest in buying the plan. It often becomes difficult for the agents to make them understand that term plans cover only the death risk and the coverage amount is quite large in comparison with other life insurance plans. They have this perception that they will have to die to get the benefits of a term plan and this is the reason why most of them are unwilling to buy it. As it is quite difficult to make them understand the benefits of buying a term plan, the agents do not take great pains to do something that does not fetch them much profit.
Most agents are not adequately trained to sell life insurance
Though term insurance plans are quite profitable for life insurance companies, little or no training is provided to the agents after contracting them for selling products. The agents may have sufficient knowledge of sales and marketing, but the knowledge of different insurance products remains inadequate. The agents themselves hardly make any effort to learn about different insurance products. What they do is focus mainly on investment plans the premiums of which are expensive. Such expensive insurance products earn them higher commissions. So, the agents hardly care about selling term insurance plans to the customers.
What should you do?
Next time when you talk to an agent, ask them for a term plan. If you find that your agent is avoiding talking about that plan and is hard selling certain life insurance plans that are above your financial capacity and doesn’t provide adequate future safety, you should move away from them. Most insurance companies, these days, offer online life insurance plans, be it endowment, low-cost unit linked or term insurance plans, that you can buy on your own without the help of any insurance agents. Moreover, there are a number of insurance comparison portals that allow you to do it yourself (DIY), compare among similar insurance products and choose one depending on your requirement. So, it is always better to think twice before trusting someone with your wealth and rely only on agents that are interested in creating money and safety for you, then themselves!
— by Santosh Agarwal, Head of Life Insurance, PolicyBazaar.com
