Don’t buy just because of promotion
Many a time, you can find insurance companies dangling freebies to attract customers. It is not unusual to find them at electronic and pc fairs where they will display advertisements showing freebies such as digital cameras or printers. You would have mistaken them as another electronic booth!
It is very common to find Investment-Linked Plans (ILP) being promoted along with the gift. If you are getting a policy because of the freebie, stop and think: Who is paying for the gift? Insurance companies are not charities. They too are for-profit organisations. Are the gifts really ‘free’?
If you still want to get that ILP, ask yourself some practical questions
- Are there any other alternative methods or strategies to meet your objective? Note that the not adviser have the access to other methods
- Do you know how the plan works and how is it funded? What is the long term potential pitfall?
- If you are thinking of getting it from a adviser on a transactional basis, is the adviser going to help you monitor, rebalance and shift the asset allocation to fit the investment objective in the future? Building a portfolio and then not monitoring and doing the necessary rebalancing could prove disastrous in the long run due to the change in the phase of life
- If the adviser promised you that he or she will do the necessary monitoring, ask why would he or she do that if they are not compensated for the work done. No 1 works for free. Is he or she giving empty promises to close the sale?
- If that adviser has sold many of such plans, how is he or she going to survive in the long run by monitoring so many policies for free?
Many advisers might dazzle you with some of seemingly superior technical features of insurance policies. Before getting any, remember to consider the practical aspects as well.