Introduction
Common insurance mistakes to avoid — This phrase might sound like “I already knew that.” But the reality is that most people make such mistakes while purchasing their insurance policy that end up causing loss to them. The job of insurance is to provide financial safety but if a mistake is made then the entire plan gets spoiled.
Today we will discuss 5 such costly mistakes that people frequently make and also see how to avoid them. This is a practical guide that will help you in taking the right decision.
Mistake 1: Buying a policy only on the basis of premium
The most common mistake people make is to give importance to low premium over coverage. It seems that paying less money is a smart choice, but when the time comes to make a claim, then we realize that the coverage itself is not enough.
This can be understood with an example:
A health insurance plan which charges a premium of ₹6,000, probably provides a cover of just ₹3-5 lakh. But in today’s medical costs, a heart surgery alone goes up to ₹10-12 lakh. Then where will you bear the difference? From your pocket.
How to avoid: Compare coverage and benefits along with premium. Always balance between affordability and adequate protection. This is one of the most important common insurance mistakes to avoid.
Mistake 2: Ignoring coverage needs
Many people while taking insurance ignore their future expenses and only look at their current needs. Result? The policy becomes underinsured.
Let us understand this with an example:
If you take only ₹20 lakh cover in life insurance, but your loans and family’s long-term expenses are ₹1 crore, then your family will struggle in your absence.
How to avoid: Always calculate your annual income × 10–15 + outstanding loans + family goals.
Similarly, in health insurance too, select coverage according to your city and family size. This is a smart way to reduce common insurance mistakes and avoid them.
Mistake 3: Not reading policy terms and exclusions
There are very few people who read the policy documents honestly. We all take shortcuts – we either believe what the agent says or read the summary from somewhere and that’s it. But the real detail is in the “terms and conditions” of the policy.
For example:
Maternity benefit in health insurance can be available only after 2-3 years.
In car insurance, accessories cover will be available only when the add-on is taken specifically.
If you understand these things at the time of claim, it would be too late.
How to avoid: Read each clause clearly, especially the exclusions. It seems a bit boring, but trust me, this step saves you from big shocks. This is the third big entry in the list of common insurance mistakes to avoid.
Also cosider reading about insurance deductible.
Mistake 4: Relying solely on the agent’s advice
I am not saying that insurance agents are not helpful but they have one limitation: they have to sell their product. Your need may be different but some agents can suggest as per their commission.
for example:
You need health cover but the agent is pushing more endowment policy because he has more incentive in that. Result? You got a policy which does not solve your actual need.
How to avoid: Do your own research, compare multiple options, and if possible take advice from online aggregators or a certified financial advisor. This is one of the major common insurance mistakes to avoid.
Mistake 5: Not reviewing the policy
Among all these mistakes, the biggest mistake is to buy a policy once and forget about it. Life keeps changing:
- Salary is increasing
- Loans are being taken
- Family is expanding
But the policy remains the same old one. Result? Coverage becomes outdated.
For Example:
You had taken a health cover of ₹5 lakh in 2015. It was fine then, but in 2025 the same cover is very less because medical inflation has doubled.
How to avoid: Review your insurance plans every 2–3 years. Make it a habit to update coverage according to income, lifestyle and family needs. This is an important habit that fixes one of the most common insurance mistakes I can avoid.
Quick Recap: 5 Common Insurance Mistakes to Avoid
- Taking a policy available at a cheap premium.
- Ignoring family and future needs.
- Skipping policy terms and exclusions.
- Blindly following agent’s advice.
- Not reviewing the policy regularly.
Conclusion
I hope you now have a clear picture of which common insurance mistakes to avoid and how to avoid them. The job of insurance is to provide safety, not to create stress.
So next time when you buy a policy:
- Don’t just look at the premium, understand the overall coverage.
- Take your loans, family goals and future inflation into consideration.
- Read the policy documents thoroughly.
- Do your own research instead of blindly trusting anyone.
- And most important, keep reviewing and updating your policies.
