Wednesday, March 30, 2022

How policy holders and investors are fooled in the name of 'guaranteed' by insurance companies, bank RMs and agents - Beware.

'Guaranteed Income plan',
'Guaranteed return plan',
'Guaranteed Insurance Plan'

Psychologically any word or words used after word 'guaranteed', is read with 'trust' and 'assurance' / 'suriety'. (it literally blindfolds the mind to read and evaluate further).

Yes Income may be guaranteed. - pay for 6 yrs . and get XYZ income guranteed from 8th to 20th year, plus a lumsum in 20th year.

Yes Return may be guaranteed - pay 1lac pa. for 15 years and get guaranteed return of Rs 2 lac pa. from 20yr.onwards for life.  (some schemes gurantee return of premiumafter some period)

Yes Insurance us Guaranteed - Isn't insurance company liable to pay on claim? yes, insurance is guaranteed.

But, investors get tricked with such words.

NOTE - #investorawareness

1_ The difference between income (amount) and returns (%) (any sujectivity involved)
2_ always check the taxability of regular return or income (tax free or tax applicable? or subjective)
3_ The Guarantee is mostly about getting 'cashflows' reguarly for specified peried of time
4_ Always check % returns when the amount is guaranteed as cashflows
5_ Be aware enough to remain concious from cashflow usage when you are actually receiving it - is it going to suffice the need (beating inflation) (if your monthly expense is 70000 pm currently and if you would receive 2 lac pa after 20 yrs., mind you it is not even going to last for 10 after 20 yrs.)

Simple is keep insurance and investments separate, unless you are fully aware what you are doing or have some neutral financial expert to guide you to buy it.

I always tell this -

_'be extra cautious' and ask more questions,
_never decide immediately or at last moment, and
_always ask for written brochures and illustrations and once received first look at disclaimers and assumptions (from find tab)
_and last but not least consult a neutral financial expert to evaluate what is on offer,
_PLUS always check suitability of tax applicability or advantage that is been offered. (yes, I have seen agents and bank RMs saying tax saving,but for so many clients they had already crossed their 80c limits)

#keepitsimple #insurance #financialplanning #financialfreedom #financialplanner