Insurance mistakes most Indians make: Expert reveals what you need to know

Amid rising medical inflation and complex investment options, insurance remains a critical yet misunderstood financial safety net. Industry expert Ranjini explains why ULIPs often underperform, why term insurance is non-negotiable, and how to navigate health coverage gaps in a post-COVID world.

Many investors avoid ULIPs, preferring direct market investments. What makes ULIPs problematic?

ULIPs charge 1–2.25% annually, creating a drag on returns. For every ₹100 premium, only ₹95 is invested versus ₹99 in mutual funds. Returns range between 10.7 and 15.7%, while mutual funds historically deliver 16–17%. Post-2008 crash, trust eroded due to market-linked risks and capital loss.

Is term insurance still the recommended choice for family protection?

Absolutely. Pure term plans ensure family security upon death/illness. Return-of-premium variants cater to those living beyond policy terms. Everyone over 18 should have three policies: health insurance, term life, and personal accident cover.

How does medical inflation impact health coverage needs?

Medical costs rise 18% yearly in India. Angioplasty now costs ₹3 lakh (vs ₹1–2.5 lakh in 2018), projected to reach ₹6–7 lakh by 2030. Major surgeries like heart transplants can cost ₹25–30 lakh. Most people are severely underinsured.

Are government schemes like Ayushman Bharat sufficient?

While beneficial (e.g., ₹5 lakh family cover), awareness is low. For ₹436/year, Pradhan Mantri Suraksha Bima Yojana offers ₹2 lakh life cover; ₹20/year gives ₹2 lakh accident cover. But these remain inaccessible to 33% of Indians earning under ₹15,000/month.

Why maintain personal health insurance alongside corporate policies?

Corporate coverage ends with job loss. If you develop conditions like diabetes before securing personal insurance, insurers may deny coverage. Always run a parallel personal policy—porting group plans is often impossible post-COVID.

What’s the biggest mistake people make with motor insurance?

Skipping comprehensive coverage for third-party-only plans. During floods, engine repairs cost ₹60,000–1 lakh, but customers reject ₹3,000–4,000 engine protect add-ons. Comprehensive coverage is non-negotiable for unforeseen events.

How critical is declaring pre-existing conditions?

Extremely. Non-disclosure—even unintentional—gets claims rejected. One client’s 17-year policy was voided over a ₹45,000 claim due to an undeclared minor history. Declare everything: eye issues, congenital conditions, or lifestyle habits.

What’s your ultimate insurance advice?

Start at 18. Young, healthy individuals get better terms. Post-25, lifestyle risks (alcohol, smoking) trigger premium loadings. Coverage should be 10 times your annual income. Insurance isn’t a luxury—it’s a necessity against unpredictable crises.

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