Insurance is an essential aspect of financial planning, acting as a safety net that helps you handle unexpected situations without depleting your savings. It’s a contract where an insurer compensates you for covered losses, protecting your finances when life throws the unexpected. Different types of insurance cater to varied needs, from life insurance to health and auto coverage. However, navigating insurance options can be daunting, especially with complex jargon and technicalities that can lead to costly mistakes over time.
Here are seven common mistakes to avoid to ensure your insurance truly safeguards your financial well-being.
Not Assessing Your Actual Insurance Needs
One of the most frequent mistakes is purchasing insurance without understanding personal needs. “Take the case of a young professional in Delhi who buys a Rs 5 lakh health insurance policy, thinking it’s sufficient for his family. With the high cost of healthcare in metropolitan areas, this coverage may fall short during a severe medical emergency. He might need a Rs 25 lakh cover per person to protect against out-of-pocket expenses in a crisis. So, it is better to assess your needs, location, and family size before buying a policy that won’t leave you vulnerable during your most challenging times,” says Santosh Agarwal, Chief Business Officer- Life Insurance, Policybazaar.com.
Also Read: Should you buy jewellery using your credit card?
Failing to Compare Policies
It’s a mistake to rely entirely on a local insurance agent, as they may push policies prioritising their commission rather than your needs. For example, a family could find themselves locked into a high-premium policy that offers limited benefits, missing out on more comprehensive, affordable options. So, it is advisable to compare policies online through neutral channels to increase transparency and explore various coverage options, benefits, and exclusions across insurers. It’s a simple yet efficient way to find a policy that meets your needs and budget.
Omitting Important Information
It’s very important to remember that an insurance contract is based on the foundational principle of utmost good faith. “Honesty with your insurer is essential—skipping over key details could jeopardise your coverage. For example, consider a smoker who withholds this information to lower life insurance premiums. The policy could be nullified if the insurer later uncovers this during a claim investigation. Transparency is crucial; withholding facts like smoking status, medical history,
» Read More
