Insurance is one of the most mis-sold financial products in India, largely because it is sold, rather than bought. Most people don't walk into a conversation asking 'what do I need?' — they respond to what an agent, a bank relationship manager, or a well-meaning relative recommends. Over years of reviewing policies for working professionals, three mistakes show up again and again.
The first is confusing insurance with investment. Traditional endowment and money-back policies are often marketed as products that 'protect and grow your money.' In reality, they tend to do a mediocre job at both. The insurance cover is typically too small relative to what a family would actually need if the earning member were gone, and the investment return, after all charges, frequently lands below what a simple debt fund or even a fixed deposit would deliver. The fix is not complicated: separate the two goals. Buy a pure term insurance plan for protection, where premiums are low and the cover is large, and invest separately in instruments suited to your investment goals and timeline.
The second mistake is being under-insured on term cover while being over-insured on health riders nobody understands. A common pattern: someone has a term cover of ₹25 lakh, which sounded like a large number when they bought it in their twenties, but a decade later, with a home loan, a child, and a higher standard of living, that cover no longer reflects their family's actual financial exposure. A reasonable starting point is cover worth 10–15 times annual income, adjusted for existing loans and dependents — not a number picked because it made the premium affordable.
The third mistake is not reviewing existing policies at all. Insurance is treated as a 'set it and forget it' purchase, but life changes — a new dependent, a new loan, a change in income — and the policy rarely keeps pace unless someone actively reviews it. We've seen policies where the policyholder was paying ₹40,000 a year for a plan that, on closer inspection, barely covered a fraction of what their family would need in an emergency, while also delivering a poor investment return on the side. An honest audit, done once every few years, catches this before it becomes a problem that surfaces at the worst possible time.
None of this means every existing policy needs to be cancelled immediately — surrendering some plans has its own costs and consequences, and that decision needs a careful, case-by-case look rather than a blanket rule. What it does mean is that insurance deserves the same scrutiny as any other financial decision: a clear-eyed assessment of what you actually need, followed by a plan to get there, rather than a policy bought once and never revisited.
