7 Costly Mistakes People Make When Buying Insurance in India
Insurance Mistakes That Cost You Lakhs
Insurance is the most misunderstood financial product in India. Over 70% of Indians are either uninsured or underinsured. Here are the 7 most expensive mistakes to avoid.
Mistake 1: Buying Insurance as an Investment
Endowment plans and ULIPs mix insurance with investment and do neither well. They offer 4-6% returns — less than a fixed deposit. Keep insurance and investment separate for maximum benefit.
Mistake 2: Inadequate Health Cover
A Rs 3 lakh health policy might sound fine until a surgery costs Rs 8 lakh. In metro cities, aim for at least Rs 10-15 lakh cover. Medical inflation in India runs at 14% annually.
Mistake 3: Relying Only on Employer Insurance
Your company's group health cover disappears when you change jobs or retire — exactly when you need it most. Always maintain a personal policy alongside employer coverage.
Mistake 4: Not Disclosing Pre-Existing Conditions
Hiding health conditions to get a lower premium is fraud. When you file a claim, the insurer will investigate, deny the claim, and may cancel the policy entirely.
Mistake 5: Ignoring the Claim Settlement Ratio
A cheap policy is worthless if the insurer rejects claims. Always check the claim settlement ratio (CSR) — anything above 95% is good. Top insurers like LIC (98.5%) and HDFC Life (98.01%) are reliable choices.
Mistake 6: Delaying Insurance Purchase
Every year you wait, your premium increases by 5-8%. A 25-year-old pays Rs 500/month for Rs 1 crore term cover. At 35, the same cover costs Rs 900/month. At 45, it is Rs 2,200/month.
Mistake 7: Not Reading the Policy Document
The exclusions section is the most important part of any insurance policy. Spend 30 minutes reading it before signing. Common exclusions include adventure sports injuries, pre-existing conditions (waiting period), and specific diseases.
How to Get Insurance Right
- Buy term insurance for life cover (not endowment or ULIP)
- Get health insurance of at least Rs 10 lakh (family floater)
- Compare policies on JaldiMoney — check CSR, exclusions, and network hospitals
- Buy early, disclose honestly, and review your cover annually