Common Term Insurance Mistakes to Avoid
Don't let these common mistakes put your family's financial future at risk. Learn from others' errors and ensure your term insurance actually protects your loved ones.
Critical Warning: These Mistakes Can Lead to Claim Rejection
Over 15,000 term insurance claims worth ₹2,500+ crores are rejected annually in India. Most rejections happen due to mistakes made at the time of purchase - mistakes that families discover only when filing a claim. Don't let your family face this situation.
Why Are Claims Rejected?
Source: IRDAI Annual Report & Industry Analysis
Common Mistakes & How to Avoid Them
The Problem:
Buying coverage of just ₹20-30 lakhs when you need ₹1-2 crores based on your income, debts, and dependents.
Consequence:
Your family receives a payout that's insufficient to maintain their lifestyle, pay off loans, or fund future goals. They may struggle financially despite your planning.
Solution:
Calculate coverage as 10-15 times annual income + all loans + future goals. For ₹12L income with ₹40L home loan, you need at least ₹1.6 Cr coverage.
The Problem:
Not disclosing pre-existing conditions, past surgeries, family history of diseases, or lifestyle habits like smoking and alcohol consumption.
Consequence:
This is the #1 reason for claim rejection. Insurers can reject claims even years later if they find non-disclosure. Your family loses the entire benefit when they need it most.
Solution:
Declare ALL health conditions honestly. Pay slightly higher premium if needed. A policy that costs more but pays is infinitely better than a cheaper policy that rejects claims.
The Problem:
Taking a 15-20 year term when you have 25-30 years of financial responsibilities ahead (children's education, spouse's retirement).
Consequence:
Coverage ends just when you need it most. After 50, buying new insurance is extremely expensive or may be denied due to health issues developed during the term.
Solution:
Choose term until retirement age (60-65) or until your youngest child becomes independent. Better to have coverage longer than needed than fall short.
The Problem:
Depending solely on company-provided group insurance which is typically only 1-2 times your salary.
Consequence:
Coverage ends when you leave your job. During job transitions, layoffs, or career breaks, you're completely unprotected. Your family gets minimal payout if something happens.
Solution:
Maintain personal term insurance regardless of employer coverage. Consider employer insurance as a bonus, not your primary protection.
The Problem:
Not updating nominee details, choosing minor as nominee without guardian, or not informing family about the policy.
Consequence:
Delayed or disputed claims. Family may not even know the policy exists. Legal complications can tie up the death benefit for years.
Solution:
Update nominee immediately after marriage, childbirth, or any change. Keep policy documents accessible. Tell your spouse/family about the policy and claim process.
The Problem:
Buying the first policy an agent recommends without comparing premiums, features, claim ratios, or rider options.
Consequence:
You may pay 30-50% higher premium for similar or worse coverage. Or get stuck with an insurer having poor claim settlement record.
Solution:
Compare at least 5-6 insurers on premium, CSR, features, and riders. Online comparison makes this easy. Don't rush into a decades-long commitment.
The Problem:
Buying ₹50L coverage today thinking it's enough, without accounting for inflation reducing its value over 20-30 years.
Consequence:
₹50L today will have purchasing power of only ₹19L after 20 years at 5% inflation. Your family's real protection declines every year.
Solution:
Build 30-40% buffer in coverage. Consider increasing cover option where sum assured grows by 5-10% annually. Review coverage every 5 years.
The Problem:
Thinking 'I'm young and healthy, I'll buy later' or waiting for the 'perfect time' to buy insurance.
Consequence:
Premium increases by 8-10% every year you delay. Health issues may develop making coverage expensive or impossible to get. You remain unprotected.
Solution:
Buy as early as possible - ideally in your 20s. Lock in low premiums for the entire policy term. Tomorrow's health is never guaranteed.
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