Suppose someone you perceive as very close to you suddenly breaks your trust? This betrayal is something horrid and to even think of it is hugely upsetting. It is even worse in case such a betrayal leads to you incurring financial liabilities. You will be astonished to know that your own bank/trusted financial institution has actually been betraying you not once but multiple times. Till now, most people were quite happy about purchasing multiple financial products from the same institution, i.e. fixed deposits, mutual funds and also insurance. However, you were being taken for a ride by your bank without realizing it.
An incident would suffice to illustrate to you what happens in this regard. Suppose person X, a 50 year old man, has an excellent relationship for a long time with a reputed bank. Now, he has already put money in some fixed deposits along with taking a regular life insurance policy with his bank itself. The bank had called him for premium payments and he went to the branch whenever the premium payment was required. Let’s say this payment is roughly Rs. 15, 000. The bank got his signature taken for some documents whenever he went to pay the premium and this took place at least three to four times.
On account of him trusting his bank blindly, he never even thought about what these documents actually were. He only kept on paying up his premium amounts and kept signing these documents given to him. Now, his son came back to the country from a foreign country and was taking stock of the investments of his father. He came upon several documents from the bank with every document indicating separate policies. When he asked his father about possessing multiple insurance policies, his dad only stated that he pays the premium for only a single policy on a periodic basis. Once they went to the bank to clarify matters, they realized how they had been taken for a ride all along.
This man has not yet got any proper settlement for his own hassles and financial liabilities incurred due to mis-selling of insurance by the bank. In case this was done in the United Kingdom, for instance, he would not have suffered so. Such complaints were also seen in the UK and banks had to pay up fines amounting to a whopping 1.3 billion pounds as per the central bank’s directive. However, RBI is yet to come up with any such fines for banks in India. This is just one particular story and there are literally innumerable such horror stories linked to mis-selling of insurance products from banks.
Here are some handy tips to avoid being taken for a ride in this manner-
- Do your own homework: Whenever you are approached by your bank with any insurance plan, make sure that you do your research on the same. For all financial products, compare with other institutions, see the returns, past history, record of the fund manager in case it is a mutual fund, your tax benefits, the tenor of the policy and other terms and conditions. This will help assess whether your agent is being truthful.
- Get written declarations: Many a time, agents often promise higher returns from financial institutions and there have been instances where they have promised to even double one’s investment in only a couple of years. These returns are too good to actually be true. In case of such promises, make sure you ask for a written declaration from the agent and also ask the agent where the money is being invested in order to get such huge returns.
- Complain immediately in case of mis-selling: In case you have already been mis-sold your insurance plan, keep one thing in mind. It is compulsory for insurance products to come with free-look up periods up to 15 days. In case of mis-selling you can surrender within 15 days of getting your documents. The premium will be refunded to you post deduction of some charges. In case you realize that you have been mis-sold an insurance product much later down the line, you can post an online complaint to your bank or take recourse to the IRDA grievance redressal cell or SEBI for stocks and mutual funds. You can also visit your nearest ombudsman in case of insurance/tax/banking.
- Nothing comes absolutely free: Many agents often get buyers by promising free life insurance for mutual fund investments and deposits. Nothing comes free and you will have to fork out the charges in one way or another. You may be paying up high charges for products being bought and even financial institutions sometimes ask customers to buy insurance for getting a loan sanctioned. Try and avoid insurance cum investment policies.
- Seek out the qualifications of your agent: You should always seek out the qualifications of your agent. Make sure that the agent is qualified to advise and sell financial products. Try and get the advice of a Certified Financial Planner.
These tips will help you stay alert and avoid being taken for a ride while buying insurance from your bank or any other financial institution.