Promissory Notes: What You Should Know When Investing

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Though promissory notes may be sold with some life insurance policies, it is important to be wary of promissory note scams which claim "high returns for a minimal investment." Remember to use good common sense and close scrutiny when evaluating claims made by promissory note sales agents. "If it sounds too good to be true, it probably is," warns Insurance.com Vice President Sam Belden. To help protect you and your investment when it comes to promissory notes, Insurance.com has listed some helpful tips below:

• If you are being pressured into making an immediate decision about buying promissory notes, there's probably something wrong—you should never be forced to make a split-second decision when it comes to your finances.
• You've heard the phrase "don't put all your eggs in one basket," and the same goes with your savings. It's not a good idea to put all your savings into one type of investment.
• If the investment sold is stamped "guaranteed" and it's from an off-shore insurance company, that should raise a red flag that something is fishy. Be sure to verify that the bonding company is legitimate.
• If the investment sold is stamped "guaranteed" or "no-risk" and advertises a high return-rate, also beware.
• If the promissory notes have a maturity of less than one year and have an above-market rate, be suspicious.
• Research the company you are buying the promissory notes from. Check with the state securities regulator and make sure they are properly registered—or that they are legally exempt from registration if not.
• Check up on your insurance agent. Most agents are required to be licensed by the state and the Financial Industry Regulatory Authority (FINRA) in order to sell promissory notes.

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Originally posted September 20, 2004.