Insurance Myths in India — And The Reality Behind Each
Many believe they are covered by their insurance no matter what, until reality shows otherwise. It is not because insurance fails to do its job, but because myths and misconceptions silently influence the way policy is read and understood. The insurance misconceptions and fault lines, however, are not always visible when analysing the face value of an insurance policy.
The gaps created by insurance myths India become clear when the policy fails to act as the financial safeguard it’s meant to be, and claims get denied. This guide states the facts to help separate the insurance myths from reality.
7 Dangerous Myths
Truth Behind Claims
Solving Gaps
7 MYTHS
Myth 1
Misconception: My claim will definitely be settled because I have been paying premiums for years.
Reality: Claim settlement ratios, or the percentage of insurance claims an insurance company pays out of the total claim requests they receive, are one of the most crucial factors evaluated before an insurer is considered. However, disciplined payment of premiums does not guarantee coverage. Factors That Influence Claim Settlement:
Insurance claims may be guaranteed only when the policyholder has not misrepresented information, committed fraud, or allowed their policy to lapse. |
Myth 2
Misconception: My employer’s health insurance coverage is enough.
Reality: Group insurance allows individual policyholders limited say in the conditions and terms of the policy. While they may provide adequate coverage temporarily, relying entirely on group insurance is one of the common insurance mistakes India. Why Group Insurance Isn’t Sufficient:
In contrast with employer insurance myths, group insurance covers may be best suited as supplementary policies over a base comprehensive cover. |
Myth 3
Misconception: Insurance is a tax-saving instrument.
Reality:
Tax savings are the by-product of an insurance policy, not the purpose for purchasing one. Financial security and protection from unforeseen circumstances should be the primary drivers when buying a policy.
Drawbacks to Buying Insurance for Tax Savings:
- Purchasing an insurance policy based on tax savings can lead to inadequate financial protection.
- Individuals may be more prone to paying high premiums.
- Buying a policy without considering long-term commitment, but only for tax savings, can lead to major financial losses.
Read through the policy document carefully and prioritise long-term savings through coverage and low premiums instead of tax savings.
Myth 4
Misconception: High premiums = Better coverage
Reality: Premiums are decided based on the age of the policyholder, their lifestyle, existing pre-conditions, and the insurer’s policies. They may not be a credible parameter for evaluating the quality of a policy or determining sufficient coverage. Compare These Factors to Assess The Quality:
Low premiums may also provide sufficient coverage, as is observed in term insurance policies and ULIPs (Unit-Linked Insurance Plans). |
Myth 5
Misconception: I am young and healthy, so I do not need health insurance.
Reality: Health risks are not conditional upon age and lifestyle, nor are unforeseen mishaps. Holding a health insurance policy keeps you protected against risks beyond your control. Pros of Getting Insured When Young & Healthy:
When you gain clarity on such insurance myths India, you understand that the insurer provides income replacement to cover debts, mortgages, and financial obligations in the case of your passing. |
Myth 6
Misconception: My claim cannot be rejected if I have been honest and transparent.
Reality: Transparency and honesty are necessary conditions for ensuring claim settlement, but they may not always be sufficient. Insurers can reject claims for several reasons, apart from specified exclusions alone. Reasons for Claim Rejection:
Common responses to the question of why claims actually get rejected, being clear on the policy terms for claim approval can help avoid mistakes. |
Myth 7
Misconception: I will get my money back from my insurance.
Reality: Not every type of insurance plan is designed to return money. In some cases, protection features are a priority over savings. Plans such as endowment policies, ULIPs, and money-back policies come with a savings component that the insured receives on maturity of the plan. They may also come with a bonus element, if promised by the insurer at the time of policy purchase. Plans That Prioritise Protection Over Savings:
Characterised by medium to high premiums, they largely focus on financial protection during the policy tenure rather than maturity benefits. |
Why These Myths Persist
The Problem: Policyholders do not readily seek out insurance policies in India. It is often sold through agents and intermediaries, who become mediums for spreading insurance myths India to boost sales.
Solutions:
- Read policy documents independently before committing.
- Place emphasis on the “Exclusions” section of the policy document.
- In case of confusion, get the clarity handed to you in writing.
What To Do If You’ve Believed These Myths
Here are a few things you can do in case you’ve already believed the insurance myths India and taken a decision based on them.
- Review the policy document in your possession. Go through it in detail and understand what isn’t covered.
- Cross-check whether the sum assured provided by the insurer is adequate for your financial needs and goals.
- Trust an independent insurance advisor and seek their feedback. Get their objective assessment and take steps better suited to your financial needs.
FAQ
Frequently Asked Questions
What are the six basic principles of insurance?
Good faith, insurable interest, subrogation, contribution, indemnity, and proximate cause are considered the six principles of insurance. They are important to ensure that insurance contracts follow a legal and fair process, can be trusted by policyholders, provide adequate coverage, and prevent fraudulent conduct. The act of spreading insurance myths India falls under them.
Does insurance in India cover osteoporosis?
Health insurance plans typically cover osteoporosis. Inpatient hospitalisation, outpatient care, medication and consultation costs are a few benefits considered under it. However, coverage for osteoporosis, similar medical conditions and different types of cancer diagnoses generally requires medical underwriting. They may also involve a waiting period.
Which diseases are excluded from life insurance in India?
In India, life insurance policies may not provide coverage for pre-existing conditions which were not disclosed at the time of policy purchase. For instance, diseases such as AIDS or conditions like alcoholism or substance abuse are not covered. Other exclusions may also include medical expenses incurred due to self-harm and death from adventure rides.
Which factors need to be evaluated before choosing insurance?
Before opting for policy purchase, make sure you do not buy into the existing insurance myths India. Evaluate the sum assured being provided by different insurers, the premium costs in the long term, No Claim Bonuses, need for medical underwriting, and maturity benefits. In case there’s an investment component in the plan, choose between equity and other types of investment instruments carefully.
What is medical underwriting in insurance?
Insurance companies assess risks and potential premiums based on the age, lifestyle, pre-existing conditions, and other medical records of a potential policyholder. This mechanism is called medical underwriting. It determines the coverage a policyholder gets based on the premium amount.
Are insurance policies mandatory?
Only third-party motor insurance plans are legally mandatory for vehicle owners in India. Apart from these types of policies, insurers are free to select insurance plans based on their needs. Moreover, add-on covers and rider plans can also be added to enhance coverage and utility of a specific base policy for policyholders in India.
ON THIS PAGE
Not sure what you need?
Speak with an expert who charges for advice — not for selling a policy.