5 ways senior citizens can avoid being mis-sold an insurance policy

There are certain insurance products by which the senior citizens can lose their hard-earned money. Given below are the schemes that should be avoided by senior citizens at all cost.

1. Policies that say "guaranteed return" should be avoided: Senior citizens do not have any requirement of life insurance. So they should not purchase it. Life insurance cover guarantees that if anything unfortunate happens to you during the period in which you are working, your family would be supported financially. But a majority of the Indians do not continue working after their retirement, buying life insurance will not be of any use to them.

   However senior citizens who are unaware of this, are often persuaded to buy the "guaranteed return" plans. These plans are long term, over 10 years and the return is also very low, around 5%. They have to pay a very high premium and normally there is no surrender value if the policy is returned within 3 years.

2. The insurance policy may be mis-sold to you: You should return the plan if it is mis-sold to you during the free look period. If the free look period is over, you can either opt for surrendering the plan or you can make the plan a paid-up policy. In order to make it a paid-up policy, the premium should have been paid for a minimum of three years for a long term policy and two years for a short term policy.

3. Insurance products should not be bought at banks: Majority of the mis-selling of insurance policies take place at banks. The banks may try to sell insurance products as they have tie-ups with the insurance companies. So investment decisions should not be made there. Senior citizens with plenty of post-retirement funds are easily targeted here when they try to make investments. The wrong information is sold to them as they are made to sign on policy papers. The bank officials do not give anything in writing as they sell the insurance product as investments to the senior citizen with the promise of high returns. Usually, the bank sends the policy documents after the free look period gets over. The buyer is helpless in this situation and as he cannot prove the mis-selling since the documents contain his signatures.

4. Single premium plans should be avoided: Three modes of premium payment- limited period, single and regular, are available for traditional plans and Ulips. The single-mode of premium payment requires you to pay a large sum of money for the entire term. Ulips are often mis-sold as fixed deposits with the promise of tax advantages and higher returns. The assured sum is 1.25 times the single premium for clients below 45 years and 1.1 times for clients above 45 years.

5. Ulips should be avoided: Ulips are traditional life plans that invest in mutual funds instead of safe debt instruments. Thus their returns are much higher. Also, the plans cannot be surrendered before a lock-in period of 5 years. As the senior citizens require a regular income after retirement, this policy is not suitable for them.

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