Introduction
Buying insurance is one of the smartest financial decisions, yet for many, it becomes confusing due to fine print and complex terms. Whether it’s life, health, or motor insurance, one wrong choice can cause significant financial stress later.
Insurance isn’t just a tax-saving tool — it’s a financial shield for your family. However, many people buy policies in a hurry or with half knowledge.
Here are the three most common insurance mistakes and how you can avoid them.
Mistake 1: Buying Insurance Only for Tax Saving
Many people rush to buy insurance at year-end just to claim deductions under Section 80C.
While tax benefits are useful, they should not be the primary reason to buy a policy.
Why It’s a Problem
- You may end up choosing the wrong policy type.
- Coverage may be too low to protect your family.
- Many opt for ₹5–10 lakh coverage, while IRDAI recommends 10–15× your annual income.
How to Avoid This Mistake
- Treat insurance as protection, not tax saving.
- Prefer term insurance over low-yield investment plans.
- Use ELSS or mutual funds for tax saving — insurance for coverage only.
Mistake 2: Ignoring Policy Terms and Exclusions
One of the main reasons for claim rejection is not reading the fine print, especially exclusions and waiting periods.
Why It’s a Problem
Policies often include restrictions such as:
- Health plans excluding pre-existing diseases for 2–4 years.
- Term plans with suicide or waiting clauses.
- Motor plans rejecting claims if rules were violated.
Many people face claim rejections simply because they didn’t read the details.
Real Example
A policyholder’s ₹1.2 lakh claim was denied because the plan didn’t cover day-care procedures — something clearly stated in the exclusions.
How to Avoid This Mistake
- Read policy documents carefully.
- Cross-check details on the insurer’s official website.
- Ask key questions like:
- What’s the waiting period?
- Which treatments are excluded?
- What is the claim settlement ratio?
Pro Tip: Choose insurers with a 95%+ claim settlement ratio.
Mistake 3: Choosing the Cheapest Premium
Many buyers focus only on low premiums without evaluating coverage, features, or claim experience.
Why It’s a Problem
Low-cost policies may include:
- High deductibles
- Limited hospital networks
- Poor claim service
- Hidden conditions
Insurance is a financial promise — not a product to buy at the lowest price.
How to Avoid This Mistake
- Compare coverage, not just premium.
- Check customer reviews and claim processes.
- Use trusted platforms like Policybazaar or IRDAI.
Example: Paying just ₹500 more per year can give you better hospital networks, faster claims, and 24×7 support.
How to Buy Insurance Smartly
- Assess needs: Life cover = 10–15× income; health cover = ₹10–15 lakh.
- Compare plans online — look at benefits and exclusions.
- Pick reputable insurers with strong claim records.
- Read all terms carefully before signing.
- Review and update your policies after major life events.
Real-Life Example
Ravi, 32, bought a ₹5 lakh endowment plan only for tax saving. Later he switched to a ₹1 crore term plan at a similar premium — giving real protection to his family.
Lesson: Buying insurance with clarity ensures long-term financial security.
Conclusion
Insurance is your safety net for life’s uncertainties. Avoiding these mistakes can save money, reduce stress, and ensure your loved ones remain protected.
Before buying any policy, take a few minutes to compare, read, and ask questions. The right insurance plan protects your future — far beyond any discount.
Call-to-Action
Need help choosing the right insurance plan?
Speak with a trusted advisor or visit our consultation page to find the ideal coverage for your needs.
FAQs
Q1. Which insurance should I buy first?
Start with term life insurance, then add health insurance.
Q2. How much life cover is enough?
Ideally 10–15× your annual income.
Q3. Why do claims get rejected?
Due to non-disclosure, exclusions, or incomplete documentation.
Q4. Can I hold multiple policies?
Yes — you can have separate life, health, and critical illness cover.
Q5. What happens if I stop paying premiums?
The policy may lapse after the grace period; some allow revival within a limited time.
