A checklist of important questions to ask yourself and your financial advisory (FA) representative.
- Never buy a product you don't understand.
- You don't have to buy everything that's recommended to you.
- What's right for a friend may not be suitable for you.
- Read all documents carefully before signing.
What to ask before buying life insurance
Policy terms, features, and benefits can be overwhelming, especially for someone new to buying insurance.
Your FA representative must explain the features of the policy he or she recommended, and why it is suitable for you.
Print and use this checklist before you sign on the dotted line.
Before you buy, ask yourself the following questions:
Has the FA representative recommended a suitable product?
Does the product meet your:
- Financial needs and objectives?
- Budget and financial situation?
- Investment risk level (if you are also building savings with this insurance product)?
Does it supplement or complement the financial products (insurance and investment products) you already have? Will you be over-insured or exposed to more investment risks?
Are verbal representations provided in line with what's in the insurance policy documents?
Verify these details of your insurance or investment documents:
- Premium or investment amount
- Payment frequency
- Payment duration
- Early termination clauses
- Product risk
- Maturity date
- Guaranteed or non-guaranteed returns
Is the information in the insurance policy correct?
Even if your FA representative asks you to, you should never:
- Provide false or misleading information
- Fail to disclose information
- Over-state your income or ability to take risk
Is there any benefit to switching insurance or investment products?
If your FA representative recommends that you cancel an existing product and purchase another, check if it would cause you to:
- Suffer a penalty for terminating your existing product
- Incur transaction costs without gaining benefits
- Obtain less benefits at a higher or same cost than the original product
- Obtain some benefits at a higher cost
If the answer is "yes" to any of these, ask him why he is recommending the product to you. Do not buy the product if you are uncomfortable with the recommendation.
Ask your FA representative
Ask your FA representative about the key features and terms of the product:
About insurance protection:
- What kind of insurance policy do you recommend and why?
- What kind of benefits and limitations does it have?
- Will it meet all my insurance protection needs?
- What exclusions are there?
- If I already have some life insurance coverage, how does the recommended policy help me?
- Will I be over-insured?
- What if I want to change the amount of coverage as my needs change?
- What kind of flexibility do I have?
- How much will it cost now or in the future?
- How will the recommended product meet my investment objectives?
- What are the returns like?
- Can I lose some or all of my money in this plan?
- Why is the product suitable for my risk profile?
- What does it mean if some of my returns are guaranteed and some non-guaranteed?
- What are the risks for my non-guaranteed returns?
- If I am buying an ILP, what funds are available? What are their investment objectives, risks, performance track record, and their charges?
- How did you select a fund based on my risk profile?
- How does the recommended product fit in with my other investments? Will it add more risk to the portfolio of products I now have?
- What other investment products will suit me?
- How much premiums will I be paying?
- How long do I need to pay the premiums for?
- What happens if my financial needs or personal circumstances change, e.g. I am retrenched or retire early?
- What if I can’t keep up with premium payments? What options do I have?
- What happens to my insurance coverage if I stop paying my premiums?
About withdrawals and termination:
- Can I make partial withdrawals of cash values?
- What happens if I make an early withdrawal or terminate early?
- What will it cost?
Take your time
If you're uncomfortable with the recommendation or want to know what else is available, ask your FA representative. You are not obligated to purchase the product on the spot.
Take the time to think about it. Shop around to see what other insurers are offering and then compare the different policies. Consult a trusted family member or friend, if necessary.