Advisors, agents, brokers and companies must inform you in simple language of your options when you are obtaining a new financial product. You have the right to know how each option affects your costs and returns. Your different options should be presented with clear explanations of how these factors fit your needs and goals and how they can be changed to affect the financial product.
Here are specific factors that should be covered to provide you with free choice:
- The financial product being recommended
- The type of financial product
- What contractual provisions can be changed
- The products internal charges and expenses
- Whether costs, fees, expenses and premiums are guaranteed and for how long
- How fees and expenses, dividends, insurance costs, and all policy components that may be under the company’s control will impact the performance of the financial product
- Surrender charges (early withdrawal penalties) and length of surrender charge period.
- All available discounts.
- For insurance: the coverage amount, deductibles, copays, coinsurance, and waiting period (if applicable)
Annual statements should include notes on changes in fees & expenses and other components as covered in Right #9: The Right to Quality Service and Fair Resolutions (Claims Handling). If you are not receiving these, check with your company for online access.
A note on fees and expenses:
You must recognize that fees and expenses have a significant impact on financial product performance. Over the long term, even small fees can have a big impact on a products long term cost.
You have the right to know the basis for a company’s denial of your application for insurance, a loan or other credit. Companies can refuse to offer you coverage based on non-discriminatory reasons, however, they must identify the reasons for their denial in writing. This written statement must fully explain the decision, including the specific incidents, circumstances, or risk factors that resulted in the denial of coverage (or modified-extra premium).
Your duty as a Financial Consumer when filing an application:
The most important thing to remember during the application process is to fill out your application accurately and completely. Always answer questions truthfully and with as much background information as possible. It’s better to err on the side of disclosure than not disclosing. If a question is not answered accurately and it amounts to fraud, it may be grounds for a lender or insurance company to cancel the loan or coverage or for an insurance company to not pay benefits.
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