Rajesh, a Bangalore IT professional, always looked for the cheapest insurance policy. "Why pay more when I'm healthy and careful?" he thought. When his family faced a medical emergency requiring ₹8 lakhs in treatment, his budget health policy only covered ₹3 lakhs. He had to drain his savings and borrow from relatives—all because he chose premium cost over adequate coverage.
Sound familiar? Most Indians approach insurance thinking, "less expense will do the job." This mentality leads to massive financial losses when we need insurance most. Let's understand the five common mistakes that could cost you lakhs.
Mistake #1: Choosing the Cheapest Policy
The Indian Tendency:
We love bargaining and finding the lowest price—whether it's vegetables or insurance. We often ask, "Can you give it for less?" without understanding what we're actually buying.
The Reality:
A ₹5,000 premium policy versus a ₹8,000 premium might seem like a smart ₹3,000 saving. But that cheap policy often comes with:
- Room rent limits (₹3,000/day when hospitals charge ₹8,000)
- Disease-specific sub-limits
- Long waiting periods (2-4 years for specific illnesses)
- No coverage for modern treatments like robotic surgery
What You Should Do:
Stop asking "What's the cheapest option?" and start asking "What's right for my family?"
Calculate actual risk: If a hospital room costs ₹6,000/day and treatment runs 10 days, you need ₹60,000 minimum just for the room. Add surgery, medicines, ICU—you're looking at ₹5-10 lakhs easily.
Real Example: A Mumbai client paid ₹12,000 yearly for comprehensive coverage instead of ₹7,000 for basic. When his father needed bypass surgery, the policy covered ₹6.5 lakhs. The "cheaper" policy would have paid only ₹2 lakhs due to sub-limits.
Mistake #2: Not Informing Family About Policies
The Indian Problem:
We keep financial matters private, even from family. Many Indians don't tell spouses or children about insurance policies, investments, or important documents. When something happens, the family doesn't even know policies exist.
The Consequence:
Thousands of crores in unclaimed insurance money sits with companies because families don't know about policies. Claim deadlines pass. Documents get lost.
What You Should Do:
- Tell your spouse and at least one child about all insurance policies
- Keep a file with all policy documents in a known location
- Share agent/advisor contact numbers with family
- Add nominee details and update them when family situations change
- Keep digital copies in email or Google Drive that family can access
Action Now: After reading this, call your family and tell them where your insurance documents are kept.
Mistake #3: Hiding Health Issues in Forms
The Indian Habit:
"A little hiding is okay." Many Indians hide:
- Diabetes or BP problems
- Previous surgeries
- Family medical history
- Smoking/drinking habits
- Existing medications
We think "they won't find out" or "we'll get the policy cheaper."
The Harsh Truth:
When you file a claim, insurance companies investigate thoroughly. They check:
- Medical records from all hospitals
- Prescription history
- Previous insurance claims
- Family doctor records
If they find you hid information, your claim gets rejected—even after paying premiums for years. You lose everything.
What You Should Do:
Be 100% honest. Yes, your premium might be ₹2,000-3,000 higher if you declare diabetes. But at least your claim won't be rejected when you need ₹5 lakhs for treatment.
Remember: Insurance companies are okay with pre-existing conditions—they just price it correctly. Hidden conditions mean rejected claims.
Mistake #4: Not Updating After Life Changes
Common Indian Scenario:
Amit bought ₹5 lakh life insurance as a bachelor. Now he's married with two kids, an EMI of ₹40,000/month, and parents depending on him. But his insurance is still ₹5 lakhs—barely enough for 4 months' expenses.
Priya started a home-based tailoring business but never updated her home insurance. When her sewing machines worth ₹2 lakhs were stolen, she discovered home policies don't cover business equipment.
Life Events That Need Insurance Updates:
- Marriage - add spouse, increase coverage
- Children - increase life cover significantly
- Home Loan - ensure sufficient life insurance for loan amount
- Job Change - check if corporate health insurance continues
- Parents becoming dependent - add them to health policy
- Starting business - separate business insurance needed
- Buying vehicle - immediate insurance mandatory
- Buying jewelry/electronics - increase home insurance value
What You Should Do:
Set a yearly reminder on your phone: "Insurance Check Needed". Review and update policies every year, especially after major life changes.
Mistake #5: Bought for Tax Saving Without Understanding
The Indian Reality:
March arrives and panic sets in—"Need to save tax!" We rush to buy any insurance policy without reading terms, just to save ₹46,800 under Section 80C.
Result? We buy:
- LIC policies with poor returns
- Insurance we don't need
- Wrong coverage amounts
- Policies with hidden charges
The Problem:
Insurance is for protection, not primarily for tax saving. Tax benefit is bonus, not the main reason.
What You Should Do:
First, Decide Protection Need:
- How much money does family need if something happens to you?
- Can they pay home loan EMI?
- Will children's education continue?
- Can spouse manage expenses?
Then, Choose Right Policy:
- Term insurance: Pure protection, low cost (₹10-15 lakhs cover for ₹500-800/month)
- Health insurance: Medical emergency coverage
- General insurance: Home, vehicle protection
Tax saving will happen automatically with right coverage.
Smart Example: Instead of paying ₹25,000 yearly for traditional policy with 4-5% returns, pay ₹12,000 for term insurance (₹1 crore cover) + invest remaining ₹13,000 in mutual funds (10-12% returns). Better protection + better returns + same tax benefit.
The InsuranceShield Promise: Your Security, Our Priority
At InsuranceShield, we understand the Indian mindset. We know you want value for money, not expensive policies. That's why we:
✅ Explain in Simple Language: No confusing jargon, clear explanations ✅ Show Exact Coverage: What's covered, what's not—complete transparency ✅ Compare Options: Show you different policies to help you decide ✅ Help During Claims: We don't disappear after selling—we help when you need claims
Start Today
Don't wait for emergency to realize your mistake. Small changes today prevent big financial losses tomorrow.
Do Now:
- Review your existing policies
- Check if coverage is adequate
- Update family members about policies
- Get expert advice for gaps
Get Your Free Coverage Review - Click Here
Because at InsuranceShield, we don't just sell insurance—we ensure your family's financial security with policies you actually understand.
Your Future, In Safe Hands
Disclaimer: This information is for educational purposes.