5 Things Insurance Agents Aren’t Telling You

Written by Marc Adrian

Life is rife with many uncertainties, and insurance policies help cover the potentially dire consequences of these uncertainties. This is the reason why many of us invest in at least one type of insurance, especially as we grow older.

The demand for insurance in the Philippine has been increasing, but the level of awareness among Filipinos remains to be low. This isn’t a surprise since the Philippines isn’t really making a mark when it comes to financial literacy.

According to a survey on insurance penetration in the Philippines conducted by Sun Life Financial Philippines Inc. (SLFP), 71 percent of these middle- to upper-class Filipinos knew about insurance but only 16 percent actually owned life insurance products.

The Sun Life Study of Lifestyles, Attitudes, and Relationships (Solar)surveyed 1,200 respondents from across income brackets in late 2017 and revealed that it is the predominantly middle- to upper-income Filipinos who have insurance products, while the common misconception is that insurance is more of a liability than a source of fund for contingencies.

On the bright side, Filipinos have now seen the importance of insurance in securing their financial future. And, we know that the best way to prepare for tomorrow is to secure it today. But did you know that there are some things that you may not know about your insurance?

Here are the top five things that no agent will tell you.

1. Low monthly premiums are not always better

It is natural to want to save money, particularly if you need to shell out some for your insurance every month. But it is a misconception to think that you are saving money with lower monthly premiums since most low-cost premiums come with lower coverage.

If your insurance agent is offering a product based on how little you will need to pay every month to get insured, look into the specific coverage that comes with that premium. Chances are, it will be less than ideal.

In addition, lowered premiums typically lead to higher deductibles and other fees. When the plan matures, for instance, you may be subject to a lesser payout than what you expect. It pays to compare similar policies and then decide according to which one offers better value for your money. Ask for quotes from at least three insurance carriers to find the best fit for you.

This isn’t to say that you shouldn’t go for insurance with low monthly premiums, just make sure that the coverage and the payout amount is agreeable for you. For supplemental insurance (second insurance), this shouldn’t be an issue unless you are aiming to get a certain amount in return.

2. Different plans fit different situations

If it is your first time to get insurance, you will want to work with an experienced insurance agent that can give you the guidance that you need so that you can get the coverage that you require.

Many agents do this by offering their best-selling products; often, these products give the most convenience at the lowest price possible. But these may not be what you need.

Your insurance agent should have a good idea of your financial health and status, as well as your specific insurance goals. If you are in debt, for instance, and don’t have multiple streams of income to depend on, term insurance may be your best bet. On the other hand, if you are financially solvent and you can afford to splurge on a good financial venture or two, insurance-investment bundles can be good for you.

Insurance providers also have a specific set of illnesses that they could cover. Common illnesses such as cardiovascular diseases rarely get covered by regular plans. If your family has a health history of such, you might want to consider getting basic insurance. Some insurance providers may not bring this up, not with the intention to lure you into buying a policy that may not suit you, but rather, due to the lack of background knowledge of their clients.

Don’t be afraid to open up to your insurance agent, from your health to your financial situation. The less they know, the less likely they can find an insurance policy that’s exactly tailored to your needs.  At the end of the day, the product that you may be offered may not be what you need. Also, if your agent does not even ask you questions about what you’d want out of your insurance, don’t buy the policy.

3. The payout will not be immediate

When talking to an insurance agent, you get the idea that in case something untoward happens, you will immediately have the cushion that you need to recover from the shock. But this may not be true. In fact, it normally takes a long time to claim payouts.

In the US, for example, different states have different laws about caps on damages, so litigation runs longer than you would expect, and that has a direct effect on when you can cash into your deserved payout.

Similarly, in the Philippines, filing for a claim requires sticking to a nuanced process that cannot get completed immediately.

Before buying a policy, make sure that you ask your insurance agent about the specific flow of filing for and claiming a payout – and ask them to be very detailed. This will help you decide whether their product is worth all that trouble.

4. Quick settlements are not ideal

Speaking of payouts, it bears noting that just because the process may take a while does not mean that you should settle for something less.

If you are entitled to a payout, your insurance company may offer you a quick settlement so that you can move on as quickly as possible, forfeiting your right to a more just payout in the process.

Always look into the specific terms of whatever you are offered, and compare that against the specific terms of your policy. If you are not satisfied with what you are about to get, don’t make it easy for your insurer to get away with it. Ask for what you deserve.

5. It is only as good as its specific terms

Finally, remember that your insurance policy is only as good as its specific components. Let’s take, for example, your plan’s maturity value.

Your insurance agent will discuss with you the base figure that you can expect to receive when the terms of your insurance are fulfilled. But this figure is only a projection, it does not account for the actual value that you may get, depending on the factors that your policy will need to adjust for.

Ask your agent for the actual returns as portrayed by the internal rate of return, so that you can see the net value of your insurance benefits at different points during its term and then compare it with your total initial investment.

Illnesses can come with a hefty price – literally. If you want to spare your wallet when your health condition is dire, health insurance should be the first thing that you should purchase as early in life as possible.

Getting an insurance agent is the first step in making an informed decision on which insurance to purchase. While an agent may help you go through all the basics, getting deep into its fine print will provide you answers to questions that you never thought of asking, and may shed some light on conditions or circumstances only common to you. It still pays to do your homework.

If you want a jumpstart on the basic, you can read more on our health insurance primer!